Preamble

The House met at Eleven o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

BILL PRESENTED

COUNCIL HOUSING (TENANTS' REPRESENTATION)

Mr. Dick Leonard,: Mr. Dick Leonard, supported by Mr. Frank Allaun, Mr. Arthur Blenkinsop, Mr. Julian Critchley, Mr. Robert Edwards, Mr. Geoffrey Finsberg, Mr. Barney Hayhoe, Mr. Alexander Lyon, Mr. R. A. McCrindle, Mr. John Pardoe and Mr. Laurie Pavitt, presented a Bill to provide for the establishment in each local authority area of housing advisory committees containing representatives of council tenants and other members, and for the co-option on to housing management committees of tenants' representatives ; to make similar provision for tenants resident in new towns ; and for purposes connected therewith : and the same was read the First time ; and ordered to be read a Second time upon Friday 8th February and to be printed. [Bill 38.]

ECONOMIC EXPANSION

11.6 a.m.

Mr. David Knox: I beg to move
That this House calls upon Her Majesty's Government to continue to pursue policies which will ensure a high and sustained rate of growth.
I first apologise to the House for the fact that the motion did not appear on the Order Paper until this morning. I intended that it should appear yesterday, but, shortly before I was due to hand the motion to the Table Office on Wednesday, I had to leave the House at short notice and I did not return until Thursday. I apologise and hope that the House will accept the apology.
I am pleased to have the opportunity to put the motion before the House this morning. Ever since coming to the House—indeed, for a long time before—I have believed that economic expansion should be the most important aim of a Government's economic policy. At least I shall have the support of the hon. Member for Ashton-under-Lyne (Mr. Sheldon) on that score, if not on everything else.
I am pleased to have the opportunity of introducing the motion also because during the past two years I have been one of the strongest supporters of the Government's expansionist policies. However, I am bound to warn the Government that if they were to rat on those policies I should become one of their strongest opponents and critics. I also believe that it is worth while to discuss this motion, because it gives an opportunity for a debate about economic growth, as such, without our becoming too bogged down on certain other economic issues, as inevitably happens in broader economic debates.
In considering economic growth one should begin by recognising the deplorable record that Britain has had for a long time. A hundred years ago, living standards in this country were among the highest in the world. Output per head was higher than in any other country. Today we are now 15th or 16th in the international standard-of-living league. Although living standards have undoubtedly risen in Britain during the past 100 years, our position has deteriorated relatively as other countries with faster rates of economic growth have caught up and overtaken us. If the trends that have been obvious for some time were to continue, within a short time we should be overtaken by countries such as Italy, Spain and Greece—countries not particularly noted for having high living standards. The view of most people in Britain is that the continuation of this decline, relative though it may be, is not acceptable.
Against this appalling record of slow economic growth it should not be necessary to argue the case for continued growth. But it is, because some people try to pretend that there is something praiseworthy in our slow rate of growth, almost as though they were attempting to justify and even glorify in Britain's second-rate record.
What, then, is the case for faster economic growth as the principal aim of economic policy? I should have thought, first, that it was of the utmost importance to halt our relative decline and to make up lost ground in raising living standards and in improving all our social and public services. It is as well for some of my hon. Friends who have doubts about this course to remember that, as Disraeli said, one of the great principles of the Conservative Party is to elevate the condition of the people, and that process necessarily involves the raising of living standards and the improvement of social and public services.
Another reason why I think that growth should be a principal aim of economic policy is that it is what people want and it should be remembered that we live in a democracy. Every wage and salary claim, every demand for a new school, a new hospital, a new road, a pension increase—all those claims and demands are demands for growth and for a higher national income to share out among all the competing claims. Any Government failing to provide that growth at a fast enough rate will, as we have seen in recent years, be rejected by the electorate.
I am sure that in 1964 the electorate rejected the Conservative Party because the voters then believed that the Labour Party would provide faster growth. Equally, the Labour Party was rejected in 1970 in favour of the Conservative Party because it had failed to produce the growth which it led people to believe that it would produce. It is all very well for people to talk about prices and other matters, but that was the real reason, for the British people are not that foolish : they thought it important that Britain should have fast and sustained growth.
People who are disappointed about the country's growth rate often complain about inflation. They say that inflation is the thing they find most objectionable in a Government's economic policy.
It has always seemed to me that it is not inflation itself to which they object but the fact that inflation has eroded their increased wages and salary and so deprived them of the benefits of growth. I am sure that most people are happy to have 5 per cent. inflation if they have had a 10 per cent. increase in income.

They are not happy to have 5 per cent. inflation if they have had only a 5 per cent. increase in income.
How do we go about obtaining faster economic growth? First of all, we must be clear that Governments cannot do it alone. They cannot by themselves achieve faster growth. All they can do is to introduce and pursue certain policies which will help to create the necessary environment in which growth will take place. The main areas in which a Government can operate are demand management, taxation policy, tariff policy, ensuring tariff-free access to large markets, education and training and promoting policies to encourage the mobility of labour.
I have no doubt that the most important of all is demand management and that the level of demand is the single most important thing in getting a fast rate of growth. Unless demand is at a high level in relation to the supply potential in the economy, unless the factors of production, labour and capital are fully utilised, unless there is constant pressure on these factors of production to pull out more and more goods and services, we shall not get fast economic growth. We need this constant pressure to bring new and more effective production capacity into existence. If demand is not maintained at a high level in relation to the supply potential, fast continuous growth is not likely to take place. As long as there is spare capacity, any increase in demand will merely take that up and will not encourage the creation of additional capacity.
I turn to the effects on growth of a high and rising demand. I want first to look at labour in the broadest meaning of the word. If there is a high and rising demand, a high level of activity in the economy, it will increase employment, reduce unemployment and reduce under-employment. Let us begin by examining the question of increasing employment and reducing unemployment. The figures for the two are not the same. This is something that people tend to ignore. The latest available figures give a working population in Britain of 24,869,000. The National Plan published, in 1965, estimated a working population in Britain in 1970 of 26,239,000. There is therefore a difference of about 1,500,000.
There are a number of reasons for this difference. One is undoubtedly that there are in Britain a large number of people who are willing to work if work is available but who are not recorded in the unemployment figures. There is, therefore, a substantial number of people not recorded on official figures who are willing to work.
I think that it is important to recognise that this figure is quite substantial and is at present probably at least as large as the number of people who are actually recorded as being unemployed. It is a mistake merely to consider that the unemployment figure as such represents all the spare labour capacity in the economy.
If we look at the unemployment figures we see that they are substantially higher than the average level of unemployment in Britain from 1945 to 1965. By my standards they are still much too high.
If there is a high level of demand in the economy we can draw into employment not just those who are actually unemployed but those about whom I have been talking, who are willing to work but are not recorded in the official figures. From both sources there is, therefore, a fair amount of additional labour available. If it were brought into productive activity there would be a larger national income. More than that, if the level of unemployment were lower it would give people a greater feeling of security. It would therefore help in industrial relations.
I take the view that one of the reasons, though not the only one, for the deterioration in industrial relations over the past 10 years has been the threat of unemployment. If we have the unemployment level that we have had for the past seven years, even people in employment are afraid that they may lose their job. Thus, when someone comes along with a scheme for introducing a labour-saving process, or someone suggests that restrictive practices should be got rid of, there is a much greater reluctance to co-operate because these restrictive practices were introduced in the first place not because men were wicked or evil but because they were afraid, and afraid mainly of losing their job.
If, by running the economy at a low level of unemployment, we can remove

this fear in people's minds it will be found that they are much more receptive to suggestions about getting rid of their restrictive practices. In the long term this will undoubtedly contribute to a higher national income.
Of course, it takes time to change the minds of men in this respect, because men in this country are basically conservative with a small "c", But eventually, if we run the economy at a high level of activity, not only will we get economic benefits but we will create an environment in which people are more likely to accept change.

Mr. Michael McNair-Wilson: Is my hon. Friend aware that some years ago the National Coal Board looked at the unemployment figure when it was about 350,000 and came to the conclusion that of that figure perhaps 80,000 persons were employable while the rest would continue to be registered as unemployed but were unlikely ever to be able to take a job? Does he not agree that there is a case for a new classification of the unemployed and those who are unemployable?

Mr. Knox: That may or may not be the case, but the basis of our unemployment figures has remained the same for a long time. We have shown that we are able to operate the economy at a lower level of unemployment than we have now. I would have thought we can do so again. Take the example of West Germany, where unemployment has been maintained for a long time at a lower level than in this country. If the West Germans can do it, I would have thought that, given the right policies, we can do it, too.
My second point refers to underemployment of people in work. When demand falls the labour force is not immediately reduced by the same proportion. There are a number of reasons for this. One is that, despite what some people think, employers do not like sacking people or losing skilled labour which they may need again, when business improves. It is true that in recent years a fall in profits has had a much more significant effect on the level of unemployment than a fall in demand.
If we are operating the economy below capacity, employers tend to keep on their books a large number of people


who are under-employed, until the position is reached when demand rises and these people are more fully employed again.
There is also an industrial relations side effect. Where managers are not fully occupied during their working hours, they have too much time to play firm politics. In doing that they are doing more than just stabbing each other in the back ; it has a detrimental affect on labour relations, to the very base of the firm. Also, those who are under-employed may no longer be earning the overtime they once did. They will have a certain sense of grievance, because people find it difficult to live on an income lower than they had previously. Those are the circumstances in which agitators can cause trouble.
It is not completely without significance that it was during the long period when the economy was under-employed and many people in industry were underemployed in the late 1960s, that there was a worsening of industrial relations. I should have thought, therefore, that if demand was maintained at a higher level we would increase employment and reduce under-employment, and would get the benefit of greater economic output and the advantages that accrue from a better industrial relations situation.
Turning to the capital position, the economy undoubtedly works much better at a high level of economic activity and demand. To start with it results in higher and better investment. Investment is not an altruistic activity. It takes place because industrialists expect an increase in the demand for what they produce, and they expect to be able to sell it and make a profit from it. There is no virtue in investment for its own sake. It will not take place if existing plant and machinery is under-utilised. It will, however, take place if there is a high level of demand and if that demand is likely to continue to increase.
Since the end of the war investment in this country has suffered a great deal from the stop-go policies pursued by successive Governments. As soon as firms have started to invest on any scale Governments have clamped down on demand and often the plant and machinery in which they had invested is not used until the next "go" part of the cycle occurs. This has done a great deal of damage to

Britain because we have not had a continuous sustained basis for investment since the war. Governments should therefore pursue a sustained high-level-of-activity policy. If they do, the necessary investment will take place, and not only more investment, but also better quality investment.
It is only if the economy is running at a high level of activity with the labour market pretty tight, that we shall get labour-saving investment, which is a type of investment on which we have fallen down badly in recent years. We shall not have labour-saving investment if there are 1 million people out of work. It is not worth while for employers to undertake it in such circumstances.
In a high activity economy there will also be greater investment in the growth industries, which tend to be the new industries. The inevitable result of a credit squeeze and a damping down of demand is that the demand for the new goods coming on the market is most affected because they tend to be luxury goods.
If demand for those products falls and there is no investment in the growth industries, it affects not only people in this country but our export performance. For these are products which a country like Britain can export. There are certain commodities which we are no longer able to sell on the scale which we achieved in the past. Other countries have learned how to build such products as ships. If we are to achieve a good export performance, it must come from the new industries.
Credit squeezes, the "stop" part of stop-go policies, and damping down of investment have been particularly damaging to these new industries. A high level of activity and a high demand policy would have better results.
We would also have better investment because we would tend to have more risk investment. If the economy is running at a high level of activity there will be a great deal of confidence and buoyancy, and people will take risks. They are much less likely to take risks in times of deflation and depression.
I turn to the prospects of growth in the present economic situation. After a number of years of stagnation, in July 1971 the Government embarked on a growth policy, admittedly rather timorously, but much more confidently in the


following year's budget, in 1972. Over the last 21 months, as a result of expansionist policies, we have had a 5 per cent. growth rate, unemployment has been halved and investment has started to increase. Inflation has been running at 10 per cent. and we have accumulated, and are accumulating, a fairly large deficit on the balance of payments.
Where do we go from there? Above all, expansion must continue. We have already lost out too much on this score compared with other countries. I have already argued that to achieve the necessary fast expansion which the country needs we require a high and rising level of demand, and the Government must convince industry and the people who make investment decisions that it will continue. The Government should devote at least as much attention to convincing industry that they intend to continue the policy of fast growth as they do to phase 3, because it is at least as important from the long-term economic point of view.
Once industry is absolutely convinced that that will happen, the effect on business confidence will be such that it will begin to increase capacity to the required amount. In the past Governments have used fine words which have soon been belied by actions. This time, having started on the road to growth, we must keep on that road, no matter what comes, and we must convince industry that we shall do so in order to persuade it to achieve the extra investment required to sustain it.
Recently, the Government reduced the growth target from 5 per cent. to 3½ per cent. I understand that it has been reduced because the underlying rate of growth in the capacity of the economy over a period of years has been 3½ per cent. But if the underlying rate of growth in the economy has been 3½ per cent. following the years of stop-go, I should have thought that if the Government were serious about continuing expansion on a long-term basis the underlying growth in capacity would be greater than 3½ per cent. In such circumstances I should have thought that a higher figure would have been more sensible. I do not argue too strongly whether it should be as high as 5 per cent., but I should

have thought that between 4 per cent. and 4½ per cent. was reasonable.
It would be difficult to achieve a 4·5 per cent. growth rate if the economy were overstretched now, until the investment being undertaken at present was brought into use. But, despite what people say, there does not seem to be much evidence that the economy is overstretched. We have 500,000 people out of work, representing 2·3 per cent. of the working population, yet in 1955 and 1965 unemployment was running at about half that figure. As I said earlier, an unemployment rate of 1 per cent. has obtained in West Germany for quite a long time.
There is, therefore, still some slack amongst the unemployed people who would be willing to take up work were it available. As I mentioned earlier, there are people not in employment who are not registered as unemployed but who are willing to work, such as married women and elderly people. The figure may not be as large as the 1½ million discrepancy between the national plan estimate of the working force and the actual working force, but it may be substantial. If it were even one-third of that number it would still suggest that there was a fairly substantial amount of slack in the labour market. However, all the contacts I have with industry suggest that there is still a fair amount of spare capital capacity.
In this context one has to remember that in 1955 and 1965 labour, and not capital capacity, eventually proved to be the constraint on the economy. At these times, the rate of immigration was higher than it is now. It would therefore be strange if, today, a shortage of capital capacity were the constraint, and I do not believe that it is. The November Monthly Report of the Economic Situation states that the latest CBI industrial trends survey shows that the proportion of firms working below full capacity has increased somewhat since the previous survey. This shows that the situation is not getting worse in this respect.
If there is not a shortage of capital, there certainly is not a shortage of labour. This does not mean that there is not some overheating in certain parts of the country, of which London is a good example. There is also some labour shortage in a small number of industries


—the construction industry comes readily to mind—and a shortage of certain skills in particular localities. But there is not a general labour shortage.
Where it occurs, the shortage can be overcome. It is the inefficient firms and public bodies, not the efficient ones, that complain about a shortage of labour. The inefficient ones are squealing and making all the noise. To overcome a shortage of labour firms can cut out unnecessary activities. There is not a firm, industry or commercial concern that is not doing some things that it does not need to do. It might be a good idea to do those things in a period of slack, but they can be cut out if there is a shortage of labour. There are still people in industry who are not fully employed. They can be found more profitable full-time activity.
A shortage of labour provides the opportunity to end discrimination against women and against the employment of middle-aged people. A shortage of labour should produce ingenuity on the part of employers to put forward schemes to enable women to work hours that fit in with school hours and school holidays. Firms can introduce—as the more progressive ones have already introduced—short evening shifts for women and others who wish to work for a few hours every night or for some nights each week.
There is a strong case for relaxation of the earnings rule for old-age pensioners in this context. There is an opportunity for firms to introduce more efficient methods to cut down their labour requirement. Some firms that suffer from a shortage of certain skills are already successfully doing this. Of course, in the longer term a shortage of labour encourages labour-saving investment.
The term "overheating" has recently tended to become a dirty word, but I do not regard it as such. Over the year overheating, a shortage of labour and a shortage of capital capacity have done far more to improve the efficiency of the British economy and increase output, and so to increase living standards, than has slack and unemployment. Overheating, the shortage of labour and the shortage of capital investment encourage initiative, imagination and ingenuity. Most managers in industry would far sooner be confronted with problems of shortages than slack and of falling demand

When there is a shortage of labour and capital, management is put on test. Managers have to use their ingenuity and other qualities which they are employed to show. With a falling demand it is much more difficult for managers, because matters may get out of control through no fault of theirs. No matter how efficient they are, firms can still do badly.
There is, in my view, no general overheating in the economy at present. There is still a fairly substantial amount of slack. It should, therefore, be possible for the economy to grow at a rate of between 4 per cent. and 5 per cent. for the next 18 months or two years, until the investment which is now being undertaken comes into production. When that happens we should be able to continue the 5 per cent. growth rate. The very fact of growth would bolster industry's confidence in its continuing, and in a 5 per cent. growth rate as a long-term prospect.
Some people blame the growth policy for the rate of inflation. To do this is to fail to make a distinction between demand inflation and cost inflation. Demand inflation is that state of affairs when total effective demand in the economy as a whole is in excess of supply potential. I have already argued that there is considerable slack in the economy today. There has been slack in the economy since 1966. How anyone can seriously substantiate a demand inflationary situation in that period is beyond belief. During those years, especially more recently, there has been a fairly steep cost inflation, not a demand inflation.
Cost inflation may take one or two forms—a wage and salary cost inflation, or a cost inflation caused by rising import prices. Until about a year ago our inflation was mainly an income cost inflation. In the past 12 months it has been principally an import price inflation. The Government cannot do much about controlling an import price inflation. The Government can do a great deal about income cost inflation, and that is why we have an incomes policy.
It is argued by some that this is nonsense and that we can have an income cost inflation only in conditions of demand inflation. There was some truth in this 10 or 15 years ago, but not now.


In the late 1960s and early 1970s there was a rapid rate of cost inflation and the deflation of the economy reached its lowest point at the time of the miners' settlement in 1972. Does anyone think that the miners' settlement was influenced in any way by the fact that 1 million people were out of work at that lime? The settlement, we must also remember, followed a period of tight control of the money supply, which suggests to me that that device is an ineffective one for controlling wage inflation.
There are new forces in our society. Income cost inflation can and does take place irrespective of the level of demand. There can be substantial slack and at the same time income cost inflation. Why has there been this change in the last 10 to 15 years? In the 20 years after the war growth was fairly continuous. From the mid-1960s onwards the trade unions and professional bodies, seeing that there was no growth, tried to use their monopoly power to opt out of the consequences by putting in demands for big wage increases, and these were granted. They had the short-term effect of increasing the living standards of the members until prices caught up, and the increase in living standards was negated. Without any growth, we had a rapid income-cost inflation during this period. If we are ever to reduce the force of these monopolies we must return to a situation in which we have continuous growth and where people expect to get a little better off each year—in real terms.
It is absurd to argue that somehow we can stop income-cost inflation, by a deflationary policy. A deflationary policy or a tight control on money supply, would accentuate income-cost inflation rather than ease it.
I believe that the Government should continue with their prices and incomes policy—if possible voluntarily but otherwise by statute—until we have enjoyed a number of years growth, with real increases in living standards. Once people have got used to this, the trade unions, professional bodies and those with monopoly power will ease their demands and we may be able to return to the situation that obtained between 1945 and 1965, though I am not sure whether we can ever again do without some form of incomes policy in Britain.
The motion calls on the Government to continue their expansionist economic policies. I believe that this is vital if living standards are to rise more quickly than they have risen in recent years, if social and public services are to be improved and expanded, and if we are to raise the general standard and quality of life to the level which will be achieved in other countries.
It will be disastrous if the Government lose their nerve in their growth policy. The effect on investment in the long term will be disastrous. Every time during stop-go cycles, when the "go" period has started again it has been more difficult to get investment off the ground because of peoples' experience when the "stop" was introduced. If, at present, when investment is just beginning to get under way again, we were to introduce a "stop" policy, it would be disastrous not just for the next two or three years but for a long time to come, as far as investment in Britain is concerned.
Furthermore, a "stop" policy would be disastrous for the general morale of the British people. The British people have increasingly become aware of the fact that other countries have overtaken them. During the period of no growth in the late 1960s and the first two years of the 1970s people were becoming increasingly frustrated with the way in which we ran our affairs, and this extended even to a much greater questioning of our system of parliamentary democracy. People began to question even that concept and wonder whether this was the best way to run this country, because it clearly was not producing the economic "goods" for our people which were being enjoyed by other countries.
If we again put on the clamps, and if our living standards stop rising again, I suggest that this questioning of our democratic system would be greatly increased and might eventually lead to that system being overthrown. When I look around the world today, particularly at the Soviet Union and the United States, I conclude that our system, warts and all, is a good one and worth defending—but it must produce the goods in economic terms and in terms of a faster growth in living standards than in the past if it is to survive.
I conclude on a more optimistic note. I believe the Government will keep their


nerve in economic expansion. Although their objective might not be as ambitious as mine, I believe that at least they are travelling quite strongly in the right direction.

11.45 a.m.

Mr. John Cronin: Hon. Members on both sides of the House are grateful to the hon. Member for Leek (Mr. Knox) for raising this subject today. He made an interesting and thoughtful speech, which all of us will consider carefully.
The Financial Secretary was probably entitled to a wry smile when listening to the hon. Gentleman's speech and his plea to the Government for increased growth. Within their limited political philosophy the Government have sacrificed everything to obtain growth. Indeed, this has been one of the most reckless economic gambles that has ever taken place. In every aspect except, recently, growth, all economic factors have worked out in the most disadvantageous way as a result of Government policies. We have the highest rate of inflation that has ever been known, the pound has been reduced in value to 75p ; the balance of payments situation is now approaching the catastrophic. The Economist pointed out recently that we are now reaching an annual rate of £2,700 million deficit on our balance of payments. The pound has been devalued by about 20 per cent., and against the German currency—and Germany is one of our principal competitors—it has been devalued by 30 per cent. The Government have multiplied by four the number of man hours lost in industrial disputes, we have a wage freeze which is causing maximum possible discontent, and interest rates are the highest this century, except for a short period of a few days in 1914.
All this heavy financial economic burden which the country is carrying is being shouldered for one purpose only—to try to obtain the growth which the hon. Member for Leek is pressing on the Government. In the light of the last few weeks this economic gamble has now been shown to have failed. We still have euphoric speeches from various quarters suggesting that all our economic problems are problems of success. Probably the most unconsciously humorous speeches are those made by the right hon. Gentleman the Secretary of State for

Trade and Industry, who tells us that we are now in an age of rising commercial prosperity. But there is no escaping the fact that the period of growth is now over. We had a limited increase in growth in the early part of this year and the beginning of last year, but it is now clear—and I think that the Financial Secretary will be the first to admit this—that the prospects of any substantial increase in growth now are very limited.
One of the tiresome things about making speeches on economic matters in the House of Commons under a Conservative Government is that one has to speak gloomily, in the tones of Cassandra. It is an unattractive thing to do, but there is no escape from the bitter economic fact that next year it is clear we must expect a world recession. We do not know how bad it will be, but since this country depends entirely on overseas trade a world recession must have a disastrous effect on the prospects of economic growth. We have a dangerous degree of inflation, and our balance of payments difficulties will shortly force the Government to cut down growth and increase taxation. The Government have no choice. These measures alone will reduce growth. But what has struck everybody so forcefully over the last few weeks is the effect of the great increases in commodity prices, particularly of fuel. We have now emerged from the era of cheap energy, and fuel will be extremely expensive. This will have a detrimental effect on the possibilities of industrial growth.
I do not know whether the Financial Secretary will accept my views about the end of the era of growth, but there is no doubt that his friends in the City have dismissed the idea of further growth in a most decisive way. In the last year the City has voted over the telephone against the Government. They have been ringing their stockbrokers and saying, "Sell, sell, sell," and as a result the Financial Times index has dropped from 510 to 380 points.
Even in more official circles we have Lord Rothschild, the noble Lord in the Cabinet Office, saying that by 1985 we shall have the lowest per capita income in Europe. The noble Lord speaks with all the resources of Government economic information at his disposal, some of it


of the most confidential nature. There is no escaping the fact that the period of growth is over. The question is what we should do about it, and the hon. Member for Leek has made some thoughtful and helpful points.
We have to do something much more fundamental to increase growth than the hon. Gentleman suggested—

Mr. Barney Hayhoe: Is not the hon. Gentleman misrepresenting the point which the noble Lord, Lord Rothschild, made? As I understood the noble Lord, he was looking back over a period of 10 or 15 years and saying that if present trends continued, by the end of another 15 years we should be at the bottom of the growth league. The same point was made in OECD reports in 1970 and since. The noble Lord was pointing out some of the things which should be done to avoid that dismal fate. I am sure that the hon. Gentleman does not wish to misrepresent the noble Lord.

Mr. Cronin: That is an extremely helpful intervention. I agree entirely that it is purely on present trends that this dismal future is before us—

Mr. Hayhoe: For the last 10 years also.

Mr. Cronin: But present trends mean the present Government's policy, and that, surely, is the real interpretation of the noble Lord's remarks.
I was about to say that it is obviously important that positive steps should be taken to cope with the present disastrous growth situation. The first step required is to cope with the fuel crisis. As far as we can see there is no hope of oil prices being reduced. Some people talk optimistically about the future of North Sea oil. It may make a substantial contribution to our economy, but we cannot escape the fact that in present terms the production costs of North Sea oil are about 10 times those of oil produced in the Gulf. There is no possibility of any early or even prolonged help from North Sea oil.
We could convert more power stations to nuclear power, but the Financial Secretary himself will agree that to overcome our energy problems by doing that will

require investment of about £1,000 million annually, which is totally beyond our means.
It is extremely important to exploit to the maximum the cheap indigenous fuel that we have ; in other words, to get the maximum coal production. But the future as regards coal production is painfully gloomy. Only two days ago we had the confrontation between the Prime Minister and the leaders of the mine workers. It is clear that, as a result, coal production will come crashing down in the course of the next few months at least. It is appalling that when one of our biggest economic difficulties is the fuel crisis and the lack of cheap fuel, as a result of the Prime Minister's obstinacy we are to be driven into a situation where we cannot even get the cheap fuel that we have available because we cannot get the miners to produce it in sufficient quantities.
We have already had several debates about the miners' case and most right hon. and hon. Members—certainly on the Opposition benches—will agree that the miners have a very strong case for a much higher wage increase than even they are demanding. That case is not diminished by the fact that the Government, backed by some Tory newspapers, have been putting out suggestions that the demands of the miners are in some way illegal or unconstitutional. Nothing is further from the facts of the case. The miners, like anyone else, are entitled to strike if they feel that their conditions are unsatisfactory, irrespective of what Government are in power and irrespective of the policy being pursued by that Government.
What is important in this connection is not merely that the miners have a strong case but that the miners cannot be induced to mine coal under their present conditions of payment and work. It is a basic economic fact that if people cannot be persuaded to do some work they have to be paid more in order to attract them into the industry or they have to be given more attractive conditions. Bearing in mind that 600 miners are leaving the coal industry every week, obviously there has to be a very much larger settlement than is possible under the Government's present arrangements.
The Government base their views on the continuity of phase 3, but I think


that most of us will agree that phase 3 is becoming increasingly meaningless. It is budgeting for an enormous increase in inflation by itself. But certainly it is not serving any useful purpose. If it is to be used as an excuse to destroy our coal industry it will be an act of the most meaningless folly.
To turn to more positive aspects of the debate, the Government clearly has to encourage capital investment. Our basic problem is that countries like France and Germany invest about 25 per cent. of their gross national product, compared with our 18½ per cent. This unfortunate trend must be reduced.
The hon. Member for Leek said that it was most important to obtain confidence from businessmen who, after all, are the people who do most of the investing. The most important way of obtaining that confidence and so reversing the trend that we have seen in the City is by efficient economic management. By every possible economic indicator the evidence now is that the country is being managed economically with the utmost incompetence. Being optimistic, one can only hope that the Government will show a little more efficiency in the economic management of the country if they are to increase confidence.
Another important move which would be desirable is some direct intervention in obtaining more capital expenditure—

The Financial Secretary to the Treasury (Mr. Terence Higgins): The hon. Gentleman has been talking about efficiency in managing the economy. If he compares the last three years of the Government of which he was a supporter with the first three years of the present Government, can he explain why the standard of living rose at an annual rate of 1½ per cent. in the first and by an annual rate of 4½ per cent. in the second?

Mr. Cronin: The hon. Gentleman has put his finger on the most important part of the debate. If we are to have growth we must save money. It must go into capital investment. It must not be frittered away on yachts for millionaires. We have to think in terms of much more money being put into capital investment. That is the point. By his very reference to the standard of living,

the Financial Secretary is showing that the Government are not thinking in terms of capital investment. They prefer to concentrate on the candy floss civilisation which they are trying to inflict on the country.

Mr. Knox: The hon. Gentleman quoted me on investment. The basic point that I made was that we had to have demand before we got investment, rather than put investment first. Does he agree that he was slightly misquoting me in that context?

Mr. Cronin: Obviously, there is no purpose in investment unless there is demand for the goods produced by the plant and machinery. The last thing we are lacking at present is demand. Inflation is about excessive demand.
The Government have behaved most recklessly in every aspect of their economic policy, except in fiscal measures to increase investment—to encourage firms to buy more equipment, plant and machinery. I suggest that there is room for much more fiscal encouragement for firms to spend more on capital investment.
Another form of Government intervention which I suggest is essential is a reorganisation or bringing back of a body like the Industrial Reorganisation Corporation which the Conservatives foolishly disbanded shortly after taking office. We need some organisation, backed by powerful Government funds, to ensure that firms get together for maximum growth, capital expenditure, and increased efficiency. Some organisation analogous to the IRC is urgently required.
There is also a case for increased public ownership. We know that the Government are already partly converted in this respect. They intervened promptly with public ownership measures in the Rolls-Royce crisis. I suggest that there is a case for increased public ownership not merely for dealing with an acute crisis, but for dealing with chronic inefficiency. Numerous firms have inefficient boards of directors which perpetuate themselves and make negligible or inefficient use of their capital resources. There is a strong case for the Government's continuing on the line that they timorously embarked upon and for thinking in terms of increased public


ownership in circumstances where firms are and will obviously continue to be inefficient unless other action is taken.
An important point that the hon. Member for Leek did not mention is that if we are to have growth it must be selective. It must be growth which will help the country's economy. Therefore, it is important that the Government should cut unsuitable or inessential capital expenditure. I have in mind particularly the senseless increase in property speculation and building that is now going on. All round us, as we sit in this Chamber today, there are vast buildings completely empty, built at enormous expense, appreciating by many millions of pounds every year and serving no useful purpose to the economy. They are merely enriching a limited class of people—property speculators. Therefore, I suggest that the Government must cut out all this unsuitable investment in property.
Finally, the most important matter for the Government is to obtain the cooperation of the trade unions. One great difference between ourselves and, for example, Germany is that the German Government works hand in hand with the trade unions. There is close and helpful co-operation at every level. In this country, to put it mildly, the degree of co-operation between the trade unions and the Government is severely limited. To achieve this co-operation the Government must reverse their anti-social policies. They must stop redistributing wealth to the rich. They must give higher social security benefits. They must repeal the Housing Finance Act. They must reverse all these anti-social reactionary policies which have exasperated the trade unions and thereby completely lost their co-operation.
I doubt whether the Government can bring about these changes in their political philosophy. I fear that it would be too much to expect. One can only say that there, lies before us, certainly in the short term, a dismal economic future. Therefore, the only useful thing that the Financial Secretary can do is to induce his colleagues to face the facts of life—that conservative politics have no relevance and no helpful contribution to make to modern economic conditions,. The best thing the Government can do is to resign and let us have an early election.

12.6 p.m.

Mr. Michael McNair-Wilson: I clearly do not share the views expressed by the hon. Member for Loughborough (Mr. Cronin), but I welcome the motion standing in the name of my hon. Friend the Member for Leek (Mr. Knox).
I welcome the advantages of an expanding economy. The Government's courage in pursuing their present economic policy is breathtaking to the extent that they are seeking to achieve an economic breakthrough that has eluded this country since the end of the last war.
Of course growth has risks. No one would suggest otherwise. But if we can get an export-based prosperity surely we have a chance of creating a new foundation for the economic wealth of this land. I cannot believe that any hon. Member would not wish to see that happen.
As for the jitters that we hear from the City, one has only to watch the stock market day by day to realise that that institution is frightened of its own shadow. Therefore, I find very little in terms of economic indication coming from the day-to-day marking down or up of share prices.
Prosperity and an expanding economy are clearly to be preferred to the stagnation which this country endured during the six years of the Labour Government. Even if prosperity has ridden hand in hand with inflation, it must be better to see employment figures rising and general prosperity becoming more commonplace among the people of this country, be they wage earners or pensioners.
One aspect of expansion that causes me concern, however, is how dependent our prosperous new society is becoming on quite a small number of industries—instead of "industries" I should perhaps say "certain essential services"—to maintain its daily standards. Indeed, one might say that the hallmark of a high living standard urbanised society was its dependency on certain centralised services. In that situation the individual finds himself no longer master of his destiny but the servant of somebody else's.
Comparing the urbanised sophisticated city dweller with, for the sake of argument, a country smallholder, the country smallholder can grow his own food, burn his own timber, and cope with his own


waste problems. The sophisticated urban inhabitant in an all-electric flat at the time of a power cut finds himself totally and absolutely unable to do anything about the situation. His standard of living disappeared as his light went out. Therefore, the dependency of the urban dweller on power station workers and coal miners becomes starkly obvious.
Although clearly I am not advocating a return to a pastoral society or even suggesting that each one of us should try to make the necessary provisions for all the services that we require, the price we are paying for a higher and more comfortable standard of living is this total dependency on a comparatively small number of people in a small number of industries, to the extent that the population of England and Wales, which is about 50 million, depends on 200,000 miners, 40,000 employees in the petroleum products industry and 65,000 people in the Central Electricity Generating Board, not to mention the 41,000 dustmen who cope with our rubbish and the thousands of bus employees who take us to work.
Almost all these groups of essential workers are undermanned—the miners by about 7,000 workers annually, though that includes surface workers and miners are leaving the industry at the rate of 600 a week. The buses in London are undermanned by 3,000 drivers and 1,500 conductors. As we know, there are 8,000 vacancies in the Post Office and 12,000 vacancies in the police. There are shortages amongst transport workers, schoolteachers, nursing staff, and even in the Armed Forces.
On a very domestic note, I am told that the milk roundsman is a dying breed ; that in five or 10 years we shall not be getting our milk delivered outside our front doors but, rather, we shall be collecting it from the supermarket in a plastic or paper container. Even in central London, my company cannot have its papers delivered daily. The newspaper round is clearly not an essential service, but the other services are essential if we are to enjoy the high standard of living society we are seeking to create.
Yet against those shortages is the figure of 500,000 unemployed. It seems strange that either unemployment remuneration is now so adequate or the jobs are so unattractive or ill-paid, or in some cases so highly skilled, that those

unemployed persons remain out of work, despite the pressing need for more manpower in these essential areas of the economy.
Indeed, it is a sobering thought but also a thought which I believe must provoke the question : what is out of balance in our society that, while demanding a higher standard of living, we as individuals seem unwilling so to re-order our priorities as to guarantee the future viability of that standard?
Some people would no doubt say "If higher wages are paid in those services the labour which is required will always be obtained." I wonder whether that is the whole answer. I do not think that it is just a question of money any more than I think that it is just a question of whether the job is dirty or unpleasant. It is an amalgam of all these qualities. I suggest that, even if domestic service was enormously better paid than it is today, we should not get people born in this country to go back into it any more than I think we shall find it easy in the future—I do not necessarily associate the two thoughts in my mind—to get young men to go into the Armed Services except in a dire emergency.
By the same token, a dirty job like being a miner or a dustman will not find the same number of recruits in the future as in the past, if for no better reason than that we have put the white-collar worker in a much higher status bracket than the man who works in his overalls.
Of course, in the years since the war we found a new source of labour that was prepared to take on these jobs that our own people were refusing—namely the immigrants. For that reason, the National Health Service and our hospitals are very dependent on immigrants, as indeed are London Transport and many of the other services to which I have referred. As immigration is being reduced to a trickle, to the irreducible minimum to which my right hon. Friend the Home Secretary has referred, by the same token we shall not find new people prepared to take on these jobs. This in turn will create further deficiencies.
I have suggested that pay is not the whole answer. Indeed, I would put forward four different reasons why these essential services are not being performed. There is the question of status, there is the question of job satisfaction,


there is the question of the conditions in which the work is carried out, and then there is the question of pay.
Man's ingenuity has been able to overcome many scarcities in the labour market by producing machines to do the work. Automation can be seen in most modern factories in this country. Where once a shop was full of manpower, now it is in the hands of a series of electronic gadgets. We have seen on our Underground services in London automatic trains. I take the example of the Tube train which runs from Victoria right into the centre of my constituency at Walthamstow, Central. It is a Tube train that does not require a driver.
People who have travelled on that train tell me that they have seen a driver, but I assure them that he performs no driving function ; he performs a safety function, although if he were removed from the cab the train would run perfectly safely because it is automated.
In the modern house where once there were butlers and servants of all sorts there are now washing machines, electric dishwaters, garbage grinders, spin driers, vacuum cleaners, and all manner of other electronic devices which have taken the place of that vast number of people who once ran the houses of the middle class in this country. In each of these cases labour provided by human beings has been replaced by labour provided by machines.
I am told that as we look into the future it is quite possible to operate ordinary train services by remote control, and even to fly an airliner from London Airport to whichever destination one likes without a pilot. Anybody who has been on the flight deck of an airliner cannot have failed to be surprised how quickly after take-off the pilot switches on the automatic pilot and flies many thousands of miles without touching the controls at all.
I believe that we shall soon have a typewriter which will not require a typist. In each of these ways labour will be saved and will no doubt be used more efficiently and effectively, as has been suggested already.
On the other hand, while we are watching jobs disappear to machines, thus using some of our labour more effectively, some of the jobs which could be mechanised are often prevented from being so mechanised by trade unions, which naturally, defending the employment position of their members, will then demand higher wages for doing the same work.
In a free market economy labour, like any other commodity, is worth what its scarcity value and the demand for it will bring ; but today the area of the free market is strictly limited. As we know, a large sector of the economy is given over to State corporations which, with the sole exception of the airlines, are total monopolies, while the labour force is, of course, organised within the trade union structure, so that, as in the present miners' go-slow, the monopoly employee organisation—the National Union of Mineworkers—is bargaining with a monopoly employer, the National Coal Board.

Mr. Robert Sheldon: I am sure that the House would be grateful if the hon. Gentleman were to correct that mis-statement. The miners' dispute is not a go-slow. It is a banning of overtime.

Mr. McNair-Wilson: I am grateful to the hon. Gentleman for correcting that. It is, indeed, a banning of overtime.
What is more, because coal is so crucial to the economy, power which is possessed by a monopoly is in this case in the hands of those who dig the coal. While it may be argued that the National Coal Board as the sole owner of coal mines in the United Kingdom and as the employer of the miners is in the position of being able to hire and fire, this semblance of power is very largely meaningless, since without the miners, and there are no miners other than those already employed, there is no coal.
This dispute, as in all others at this time, is fought against the backcloth of the third stage of the Government counter-inflation measures—and while I am trying not to discuss the miners' dispute, it is the backcloth against which this dispute and any other between employees and employers on wages must be fought. Thus, and inevitably, each pay


struggle is not so much between the employees and employers but between employees who are unwilling to accept stage 3 and its limitations and the Government.

Mr. Ernest G. Perry: Do not forget the professional workers.

Mr. McNair-Wilson: "Employees" could cover anyone involved. I repeat that I am not discussing the miners' dispute.
But I repeat what I have already said, namely, that the society in which we live is dependent on a comparatively small number of workers. It could be argued that if our society had its social values right, its dependency on these workers would result in their getting much higher rewards than they do. Indeed, if these workers were getting the free market price for their labour, the so-called league tables which the trade unions like to keep in existence to indicate the positions of their relative wages would go by the board as an anachronism and obstacle to what these workers might reasonably expect to receive because of their necessity to the whole of society.
It could also be said that no one—Government, Parliament or any other organisation—should stand in the way of these people getting what they want and that, therefore, the restrictions imposed by stage 3 stand in the way of their being able to sell the one intrinsic asset they have—their labour—at the highest price they can get. But to accept that proposition would mean that trade unions and other organisations which have created their own obstacles to modernisation, mechanisation and automation should give up their willingness to put these obstacles in the way of progress. If labour is to be given the benefit of a free market economy and is to achieve as much as it can reasonably get, by the same token it cannot from a monopoly position then impose its own restrictions and thus pick and choose. There must be tit for tat.
I am sure that it is accepted by all hon. Members, certainly by Conservative Members, that the economy is run for the good of all the people. Work is not merely an economic necessity but a social requirement to be provided by the State through the policies which it carries out. The opportunity to work becomes a

national right. If it is a right, it in turn imposes a responsibility on each person in the economy to act unselfishly within the economic framework which the Government of the day have created. This assumes—although in the present case there is no question of an assumption—that the economic framework is designed to help all the people of the country to prosper.
But there may be a case, I believe it is a strong one, for paying the workers in the essential services—we can all make out our own lists of such services, but mine would include heating, lighting, water, waste disposal, police, public transport and medical services—a special supplement which would be added to their wages even under stage 3 of the counter-inflation policy. The supplement would be designed to give additional advantages to employees in those industries, not only to reward the present workers but to act as an incentive to bring back the extra workers who are needed to meet the shortages which I have mentioned.
I throw out the idea of a supplement as a suggestion to my hon. Friend. The suggestion could be put to Parliament and, if accepted, become law. It would recognise the additional social value of these groups of workers. I do not pretend that my list of essential services would be the same as everyone else's but if any one of the essential services I have named goes on strike it is always suggested that the troops should be brought in because the service concerned is crucial to the running of the country. Equally, there is a precedent for describing essential services. During, the last war groups of civilian workers' jobs were considered for instance to be so important to the national interest that the workers were exempted from military service.
Such a list of essential services would be difficult to work out, but we each have a duty, particularly if we work in the essential services I have listed, to refrain from using the power which dependency by the bulk of the community has put into our hands. To refrain from using that power calls for sacrifice and unselfishness.

Mr. Ernest G. Perry: I agree with what the hon. Gentleman says about self-sacrifice, but does he know what ordinary people think, driving their ordinary cars and asked to restrict their driving to save


fuel, when they read in the paper this morning about dozens of private jets flying all over Europe from this country using thousands of gallons of high octane petrol for journeys which could be made by public air services? Does he not agree that this is a colossal waste of petrol and that there should be self-sacrifice from the people using those jets?

Mr. McNair-Wilson: It is too easy to make a blanket judgment on any issue. I have learned from dealing with my constituents that it is unwise to make a snap judgment until a case has been properly looked into and all the considerations have been taken into account. All I would say—not necessarily in terms of people using jets in that way, because I do not know their individual circumstances—is that, because there are so many sinners in the world, that is no reason why we should not seek to be saints. I admit that selflessness is a rare quality in our modern society, which is too often out for grabs. But because a high standard of living society depends on a small number of workers who could if they wish stop that society, therefore in asking those workers not to use the power which is in their hands one is initially asking for a degree of selflessness.
There was a comment in a leading article in The Times this week on the present problems between the National Coal Board and the miners. Part of the article said :
If the separate interest groups in Britain now decide to negotiate in terms of absolutes rather than negotiating towards settlement, that will tear our society apart.
Therefore, this is the time for each of us to think not simply with the locked-in attitudes of whatever group we belong to. As individuals, we should have a common loyalty to this nation, and a common interest in making parliamentary democracy an effective means of Government.

12.29 p.m.

Mr. Robert Taylor: My hon. Friend the Member for Leek (Mr. Knox), who has been kind enough to arrange this debate, has, as he said, been a consistent supporter of a policy of growth to cure the country's economic problems, but I thought he

did his case a slight injustice by moving rather quickly over the problems that we face today, after a period of two and a half years of pursuit of the solution which he advocates.
Those of us who represent constituencies in the South-East, perhaps particularly in Greater London, come into contact with the problems which have been brought about by this situation more frequently than do those hon. Members who come from the Midlands and other parts of the country. I suspect that there are few of us in this part of the country who do not know of firms in our constituencies which are desperately short of labour. They have great difficulty in filling their vacancies in spite of strenuous efforts and the adoption of the proposals suggested by my hon. Friend the Member for Leek.
It is not correct to say that these firms are inefficient. That was far too sweeping a statement for any hon. Member to make. Many extremely efficient firms in this part of the country are suffering from a labour shortage for which they have no share of blame. In addition, it would be wrong to castigate London services as being inefficient. I do not believe that the London transport services of today are inefficient. It may have been reasonable to suggest that that was so some years ago, but under Sir Richard Way great efforts have been made to improve efficiency and make the services more attractive to those who work or live in London. To state again that inefficiency is the reason for the labour shortage is completely unfair.
In addition, the policy of growth has brought about a shortage of materials in some industries. There is a great shortage of non-ferrous materials which are needed by the engineering industry. As a result of these shortages we have high prices on the London commodity exchange, which has again generated inflation.
We are all aware of the high level of imports which is creating a balance of payments problem. My hon. Friend the Member for Leek touched on that subject, We are told that it is not a crisis ; it is a problem. But my hon. Friend did not mention the very high level of interest rates. I am extremely concerned about the high level of interest rates which is prevalent in the country today. A number


of small firms will find the strain of coping with this added burden of interest quite intolerable.

Mr. Perry: In London, particularly.

Mr. Taylor: Many small building contractors have always financed much of their work in hand through bank borrowing and they are desperately worried about the situation that they face, because if they are able to obtain overdrafts today at 17 per cent. they are lucky. The majority are paying 18 per cent. It may be that this solution is for only a temporary period and that it is the intention of the Government to reduce the rate at the earliest possible date, but if there is a continuing adverse balance of payments over the next two or three months they will find it extremely difficult to bring down the interest rates.
It is astonishing that in this country interest rates need to be so high when in a country such as Belgium the base rate has risen, this week, from 7½ per cent. to 7¾ per cent., which is not much more than half our rate. This must be a cause of worry to anyone who is involved in industry. I should have thought that the time had come when my hon. Friends at the Treasury could produce an alternative solution which would withdraw a certain amount of liquidity from the economy—a solution which would not hit industry so severely and would not force up industry's costs, which in turn must be inflationary. These high interest rates must eventually be passed on to the customer or the consumer.
The suggestion that I should like my right hon. and hon. Friends to consider very carefully is that we should withdraw credit cards from the economy for a period of, say, six months. That may be a revolutionary step, but it is far more preferable than penalising industry through high interest rates. Too much credit is available at present. The answer is not to penalise those who are legitimately using that credit to finance their industries. We should penalise those who are using credit to satisfy their particular consumer wishes. A six months' cut-back in credit facilities through the credit card system would dampen down credit, which is the subject of our debate.
That, however, is a very small price to pay. I should like also to see a system introduced at the earliest opportunity by which credit cards are subject to a stamp duty of some form. Our problems today have been stimulated by the free issue of credit cards to people who have in no way solicited them. It is a problem that I raised in a Question at the time of the initial free issue. It is time the Government faced up to the problem of too much credit at the consumer point creating too expensive credit at the manufacturing or commercial point. I hope that my hon. Friend the Financial Secretary will give that suggestion very careful consideration.
We have recently had a debate on problems that are special to London. Most of the hon. Members who took part laid great emphasis on the fact that the lack of housing in London was a very severe factor in creating the difficulties which London faces. Indeed, housing which is available is extremely costly either to rent or to purchase. Again, this is a problem which the Government must face. In The Times of today and in other national newspapers there are advertisements about what the building societies are doing. There is a half-page advertisement in most of the national Press. The point is made that the building societies, with the help of the Government, have agreed on ways of helping more first-time buyers to get mortgages. I believe that that solution is of no help whatever. It is tinkering with the problem and will be of very little consequence, because the root of the matter is that first-time purchasers of houses find it very difficult to get the initial deposit, let alone pay the monthly instalments.
We are told that the rate of return to investors in building societies is grossed up to a figure of about 10·6 per cent. I should like to put forward an alternative solution to that which the Government have agreed with the building societies. I believe that many people in a high income group would be prepared to invest money in building societies if their net return, after payment of tax, was considerably greater than that which they receive now. If the gross return is in excess of 10 per cent., those who are subject to a high level of taxation of unearned income are probably achieving a return of only about 1 per cent. or


2 per cent. on their money. If they could be induced to invest in building societies for a net return, free of all tax, of about 4 per cent.—which does not even keep up with the rate of inflation—that would still be an attractive form of investment to those with a very high level of income. That money could be channelled into a special fund in the building societies which would be available only to, for instance, purchasers of properties in the London area of a value of less than £15,000, and, outside London, of a value under £10,000. The building societies would then have two channels of funds, one being a special fund in respect of which they are, in effect, paying a much lower rate for the money, which could be lent out for low-cost property. Those two suggestions will, I hope, be of some use to the Government.
I conclude by repeating that I am extremely apprehensive about the high level of interest rates. I hope that my hon. Friend the Financial Secretary will say that it is not the Government's intention to try to maintain these rates indefinitely and that this is a temporary expedient while other proposals are coming forth.
I apologise for the fact that I shall have to leave for a long-standing appointment, but I look forward to reading my hon. Friend's reply in due course.

12.40 p.m.

Mr. Norman Lamont: We must all be much indebted to my hon. Friend the Member for Leek (Mr. Knox) for initiating the debate and introducing it with his usual informed enthusiasm. As my hon. Friend remarked, it is rather difficult to speak against the motion. It is like a motion which is in favour of sunshine. I am tempted to think that it is similar to a motion which might have come from a Liberal Party conference—namely," That this conference, mindful of the dismal inheritance of bad weather from successive Labour and Conservative Governments, calls upon the Liberal Party to usher in a period of everlasting sunshine." It is a pity that a Liberal Party spokesman is not present to give us more such sentiments.
It is obviously right that the Government have made it their objective to increase economic growth. That is the

core of their strategy. As my hon. Friend the Member for Leek said, for years and years Britain has lagged behind its European competitors. We have seen the standard of living and of public services available to people in other countries gradually overtaking and surpassing our own. It has been a great achievement by the Government in the past two years to have brought about such a large increase, not just in the living standards of the people but in the services which are available. It is because so many of the good things in life—for example, improved pensions and the riddance of slum hospitals—depend on an improved and faster rate of growth that I support the Government's strategy and the priority which they have given in the past to growth.
I am sorry that the hon. Member for Loughborough (Mr. Cronin) is not here. I feel that he misinterpreted Lord Rothschild's remarks when he was talking about Britain's future and the possibility of the country's ending up as the poor man of Europe—poorer than Spain, Greece and Portugal. Lord Rothschild was extrapolating trends going back a long way. It is because of the low growth rate that we have achieved, not in the recent past but since the war, that the point can be made that if we do not improve our growth rate we shall be the poor man of Europe. It is precisely that which the Government wish to avoid. For that reason we have had priority given to growth in the past two years.
In previous periods we have seen short-lived periods of economic growth. Just when capacity has been taken up the economy has run into bottlenecks. That is what the Government are now trying desperately to avoid. They are trying to achieve a longer and more sustained rate of expansion.
There was once a famous Derbyshire fast bowler called Cliff Gladwin who took many wickets. On one occasion he had the distinction of scoring the winning run in a test match against South Africa. He managed to score that run off his pads. When congratulated on his remarkable achievement he replied. "Cometh the hour, cometh the man." Economic growth in the past has sometimes been a little like that. We have had little spurts of economic growth which have been due in no small measure to


external circumstances, or to the amount of available capacity which has been taken up. The Government are now going for more than a spurt, and not just a run scored off the pads. They are trying to move into long-term and sustained growth.
It seems fashionable to label present problems as the problems of success. I am not sure exactly what the phrase means, although I may have learnt its meaning this morning when I suddenly received through the post a large tax bill. I felt extremely depressed about that, but later managed to say to myself, "You shouldn't worry too much, old man ; these are merely the problems of success."
I do not in any way wish to imply that the economy has been living beyond its means as, apparently, I have been doing during the past few months. However, it is true that there will be problems in directing the British economy towards a higher and longer-term rate of growth. We can—and there is a tendency to do this—much over-estimate the influence which the Government have upon the rate of growth. I am inclined to the view that while Governments can lower the rate of growth of the economy over a long period, it is difficult for them, other than in the short term, by economic management to raise substantially the rate of economic growth. We can quickly and easily get into a situation in which the economy expands up to the limits of its capacity. From that moment onwards the rate of economic growth depends upon the rate of growth of underlying capacity. How quickly that capacity grows is not dependent upon the demand-management policies pursued by Governments. Such capacity depends upon a number of factors, such as the qualities of management and labour productivity.
I welcome what the Government are doing to encourage retraining in industry. One of the great problems concerning the limitation of growth in the past has been that skilled labour is in different parts of the country. The distribution of the labour force sometimes makes it difficult for industry to expand output quickly beyond a certain point. The fiscal climate can affect the underlying rate of growth of the economy. I very much welcome the changes which were made by the Government in our taxation

system. They will increase the rewards and incentives available to management.
I still believe, as do many of my hon. Friends, that incentive is still an important factor in economic growth. It is necessary to encourage people and firms to increase their enterprise and risk-taking activities. Another factor regarding the underlying rate of growth is the exploitation of natural resources—for example, North Sea oil. I welcome the emphasis and close attention which the Prime Minister has personally given to North Sea oil. I emphasise these matters because I suspect that some of the old clichés about the productivity of labour, natural resources and people working harder have rather more truth than is sometimes attributed to them when we try to raise over a long period the underlying rate of economic growth and become jammed up against capacity.
If I had to explain the difference betwen economic growth in our country and economic growth in Germany and Japan I should say that it springs fundamentally from different attitudes. In Germany and Japan there is a sense of insecurity. There is a desire to succeed and to improve conditions which spring from this sense of insecurity. That is because the people of those countries have lived through much more difficult times than we have. They know that things can go badly wrong, and that success for their country is not necessarily assured. It is perhaps that sense of insecurity which has given the Japanese and German people so much of their energy and economic success since the war.
I emphasise these matters simply because I believe that just as before the war Governments underestimated their ability to influence the economy, today we are in danger of overestimating the ability of Governments to affect the underlying economic factors. Once we are in the position of being up against capacity Governments must not forget that it is individuals and firms—the macro-economic problems—which will determine the longer underlying rate of growth.

Mr. E. S. Bishop: The hon. Gentleman is asserting the view that uncertainty is a vital factor in the expectation of growth, and that may be the case. But in modern society, with so many changes due to science and technology,


such uncertainty is bound to prevail. However, the hon. Gentleman might turn his mind to another aspect—the way in which, despite the Prime Minister's aim of uniting the nation, he has divided it, and we are now in a free-for-all society in which those who have done very well are lecturing the others on their responsibilities.
Does not the hon. Gentleman think that, if he wants to achieve greater growth, the Prime Minister should reconsider his attitude and philosophy so that our people can feel that they have a part to play in a national crusade towards greater growth and prosperity? It will not be achieved by dividing the nation in the way in which it has been divided, as shown by the present industrial troubles, which spring not from irresponsible militancy but because workers in essential industries—the miners and many others—are not getting a fair share of the national cake.

Mr. Lamont: I am not sure which of those five questions the hon. Gentleman wishes me to answer, but I think it a pity that, when I was not making a party political point in any sense but merely describing some of the factors that I believe to be at work in countries like Germany and Japan, he should intervene in such a highly partisan and biased way. I do not accept what he has said. Like my hon. Friends and, I suggest, the great majority of the British public, I believe that the framework within which the Government are operating—the emphasis that is placed upon the lower paid and the aim of expanding the economy while giving greater help to them—is in the interests of the whole community and is obviously a fair policy.
The second problem that may arise when one attempts to go in for a long-term policy of raising the underlying growth rate of the British economy is that very often these temporary boosts and spurts of growth simply aggavate our inflationary problems. That, I believe, arises because of the asymmetry of monetary policy in its effect on output and prices.
This is so much so that if the Government, starting from a situation of recession and a large amount of unemployment, expands the economy through a

generous financial policy, the impact on output and employment arises about a year afterwards, whereas the effect upon prices lasts much longer and does not become apparent for a rather longer period. Therefore, one runs into a situation—it has happened over and over again in Britain—in which one has corrected unemployment at the cost of creating an inflationary problem later on. If one then tries to correct that inflationary problem again through monetary policy or financial methods, the time lags are considerable, and because monetary policy has these long-term lags, the effects usually go well beyond the horizons of the Government, who often have their minds very much on the next General Election.
I believe that the sudden bursts of financial laxity that one has seen from time to time in the British economy may have been responsible for the fact that the long-term trend of inflation has slowly been upwards, and that when one has had correcting action, at best its effect has been merely to stabilise rather than reduce the rate of inflation.
I make this point simply because I hope that the Government, as well as trying to boost the long-term rate of growth in the economy, will also have regard to looking a long way ahead at the problems of inflation and will take into account the fact that many of the time lags operating in them can be very considerable.
A third problem which often arises, and has done so under both Governments when they have attempted to expand the economy, has been that of the balance of payments. So often, the Government have expanded the economy merely to run into very considerable difficulties on the balance of payments. I do not believe that we are seeing it in quite the same way this time. We are witnessing a major change in the terms of trade and commodity prices in the world. Clearly, some of the hopes and expectations of the Government have been falsified by events on the balance of payments, but it is wrong to suggest, as the Leader of the Opposition and the right hon. Member for Leeds, East (Mr. Healey) did in the recent censure debate, that the blame for the deterioration in the terms of trade and the rise in import prices lies on the depreciation of sterling


as a result of its floating. That is an incorrect view to take, and one merely needs to look at the statistics to see that it is not true.
Since the Smithsonian Agreement there has been about an 18 per cent. depreciation of sterling. In the same period, there has been a rise in import prices approaching 50 per cent. and a rise in commodity prices, in the last 18 months, of nearly 90 per cent. So the rise in commodity prices and import prices generally has been much greater than the amount of depreciation in sterling.

Mr. Sheldon: I suppose that one can quote whichever statistics one might wish, and I am not accusing the hon. Gentleman of selectivity. But perhaps one of the most objective statistics is that used by the Price Commission. It said that raw material prices in the 12 months up to August this year rose by 37 per cent. The 18 per cent. devaluation since the Smithsonian Agreement, if seen in the same context, is fairly appreciable.

Mr. Lamont: But the 18 per cent. depreciation of sterling covers a two-year period. The figure covering import prices is, of course, for one year. But if one takes the figures from the beginning of September 1972 to the beginning of September 1973, the facts are clear. During that period, exports and imports rose in volume by precisely the same amount—128 per cent.—while the terms of trade deteriorated by 18·3 per cent. At the same time, the exchange rate deteriorated by only between 4 per cent. and 5 per cent. There is a clear difference there. The movement in import prices during the period was quite independent, and was much greater than the movement in the exchange rate. That is undoubtedly responsible for the fact that the trade balance deteriorated in the period quoted by the hon. Member by about £1,000 million. It is difficult not to believe that the Leader of the Opposition was not misrepresenting the position, that he could seriously entertain the thought that the depreciation in the exchange rate was other than a relatively minor cause of the rise in import prices.

Mr. Sheldon: The facts were clearly that the rise in raw material costs, to which the Government attribute a great

deal of their present difficulty, was 37 per cent., and if they had not devalued the pound, we should have been 18 per cent. better off.

Mr. Lamont: One cannot compare figures covering two and one years. I have already given my figures for that period. One knows that import prices have risen considerably since that date. But I am sure that we can rely on the Financial Secretary to settle this dispute to the satisfaction of the House.
In its effort to minimise the difficulties that have been caused by import prices in this period, one would have thought that the Opposition Front Bench would at least have remembered how favourably the terms of trade had moved for the Labour Government during their time period of office. During the period when the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) was Chancellor of the Exchequer, when he managed to turn round the balance of payments from a deficit of £102 million in the second quarter of 1968 to a surplus of £255 million in the first quarter of 1970, he was helped by a slight improvement in the terms of trade, whereas during the period August 1972 to August 1973 there has been a deterioration in the terms of trade of 18 per cent.
There is a problem, and there is no point in pretending otherwise. Changes have occurred through no fault of the Government. But they require changes in policy for the new circumstances. The problem that has to be dealt with is that we have to pay in 1973 at least £500 million more for the same quantity of oil as we used last year, and probably a much larger sum will be necessary in 1974, while for the amount of raw materials imported in 1973 we shall have to pay another £1 billion. It is a considerable problem of adjustment that has to be made.
The question often asked is "Will world commodity prices come down?" I believe that they will. One has only to look at the behaviour of commodity prices in past years. One has seen considerable accelerations in commodity prices followed by periods of severe correction. One reason why commodity prices have exploded is that they were artificially depressed for a long time. Another reason, no doubt, is that many of the under-developed


countries wish to achieve a higher return from their exports of commodities.
But the chief reason for the rise in commodity prices must have been that in 1972–73 one had the unique position in the world economy that one had not just the American economy but the whole Western European economy as well as that of Japan moving near to the point of capacity. The result was that the pressure of demand pushed up the prices of commodities and raw materials.
Now we can begin to see, dimly, the prospect next year of a turndown in the European economy, and certainly that will happen in the Japanese economy if the Japanese forecast of growth revised from 9 per cent. to nil is correct. The downward movement in Europe and the United States is likely to have a severe effect eventually upon world commodity prices. It will happen. These things always happen with a time lag. One remembers that in a period when people were waiting for world commodity prices to go up, they were asking "Is it going to happen?" Just because these things have a long time lag is no reason to depart from rationality and from forecasting that commodity prices will considerably fall.
The problem that we now face is : if these prices fall, how far will they help? We are in a different situation now. Although commodity prices in general will still come down and the Government are right to have their expectations for commodity prices, the whole situation of oil supply has now changed. Even if other commodity prices come down, that fall will be considerably offset by the rise in oil prices. Will that give us enough relief on the balance of payments? It is a difficult problem.
Hon. Members may have seen an article by Professor Day in the Observer a couple of weeks ago when he pointed out that the terms of trade had now moved so far against us and that the annualised deficit in the past few months in the balance of payments might be around the £2,000 million mark. Because the terms of trade have moved so far against us, Professor Day calculated that, in order to put our balance of payments back into equilibrium, one would have

to shift into exports about 2·5 per cent. of the gross national product.
That is a large part of the forecasted growth for the economy next year. It will be a difficult task if Professor Day's calculation is anywhere near correct to shift resources to that extent into exports.
The problem that faces the Government is how, with the resources available currently, they can increase consumption by 3 per cent., as the strategy of the prices and incomes policy has implied, and increase exports at the same time as increasing investment and carrying the burden of public expenditure. Those four factors make a considerable demand upon our resources. The trend of the balance of payments in the recent past has been, to put it mildly, a little worrying. The trend in the balance of payments may indicate that we are beginning to run into real capacity problems in the economy.
As the Chancellor of the Exchequer said and as the Chief Secretary to the Treasury mentioned at Question Time yesterday, it is true that the volume trends of exports this year, compare favourably with those of 18 months ago. But from more recent figures it is not clear that this trend has been continuing. In the past 12 months, both exports and imports have risen in volume terms by 12·8 per cent. Comparing the third quarter of this year with the second quarter, the volume for exports has risen rather less than the volume for imports.
If favourable volume trends are beginning to slow down on the export front, that is alarming, and it would be consistent with a state of overheating in our economy. That may also have been confirmed by the fact that in the balance of trade figures for one month one saw a fall in exports of about £54 million. But I agree that one should not place too much emphasis on one month's figures.
The signs are there that we are running into capacity problems for the economy. My hon. Friend the Member for Leek seemed to doubt this point. We only need to try to buy electrical goods in the shops to find that firms such as Hoover are actually rationing their deliveries to the stores. We have become net importers of cars for the first time. There are shortages of many raw


materials, like building materials and plasterboard. I discovered the other day that it is not possible even to buy plastic spoons to put in a canteen. The Japanese have been going around buying all the plastic.
No doubt some of the shortages are caused by external factors, but some are also caused by the pressure of demand in the domestic economy. It is significant that in the last CBI survey, members said that they were experiencing capacity problems and over 50 per cent. of them cited a shortage of skilled labour as the main limitation on capacity and production.

Mr. Knox: Will my hon. Friend accept that the report I quoted earlier suggested that the shortage of capacity was less in the most recent CBI report than in the earlier one?

Mr. Lamont: I do not remember that, but I accept what my hon. Friend says. Even if it was less in the most recent report, to have over 50 per cent. of members referring to shortages of capacity and, in particular, to shortages of skilled labour, seems a not insignificant problem. I agree with my hon. Friend that if one is going for growth one has to bang up the economy against capacity ; certainly, but we cannot exist in that state for too long. We cannot remain in a situation where the economy is at full capacity and just wait for investment, for new supplies of skilled labour to take their time to appear. That results in the inflationary pressures getting worse, along with the balance of payments.
Although I appreciate that it is extremely difficult to make any economic judgment about the next few months, given the confusion of the oil situation, I believe that there is some argument at least in favour of slightly cooling the economy to make more room available for increasing exports, and for cooling the demand that has been responsible for part of the deterioration in our balance of payments in the last few months. I hope that the Government will resist the calls that have been made for increases in direct taxation. They would not help the Government's economic strategy at all. Indeed, I strongly believe that if we

were to increase taxation at this point it would very much undermine the Government's counter-inflationary policy and would have an extremely damaging effect upon industrial relations generally.
I should very much prefer that, to make more resources available within the domestic economy, the Government made some public expenditure cuts. If we are to go for a policy of 3 per cent. to 5 per cent. growth in the foreseeable future, I wonder whether all the aid envisaged under the Industry Act should still be made available and whether we could not move back to a policy of having cash ceilings for public expenditure rather than having these adjustments every year in terms of that year's prices.
I hope that the Government will devote a considerable amount of thought and time to policies for making labour more readily available, particularly skilled labour. This was the point made by my hon. Friend the Member for Leek. I agree with what he said about the earnings rule. I agree that a change here would encourage many retired people to return to work, making their skills and labour available once again to industry. I also agree with what he said about encouraging married women to return to work. There are these pools of surplus labour available and we must all do all we can in present circumstances to get that labour back and make it available.
There are other things the Government might usefully consider. Perhaps the nationalised industries should be encouraged to shed some of their skilled labour. To those who say that such a policy is rather a heartless one, I would point out that at this time, when the economy is booming and there are tremendous shortages of skilled labour, such people would not experience great difficulty in obtaining new jobs, while the policy would be of overwhelming benefit to the whole economy.
For the same reason the Government should encourage hoarders of skilled labour to release some of it. They might consider increasing that part of the redundancy payments scheme for which they are responsible. That, too, could make a contribution towards releasing the skilled labour that is so desperately needed.
Another matter at which I hope the Government will look carefully, particularly in relation to the degree of overheating which is beginning to appear in the economy, is the area of monetary policy. I am far from believing that we can deal with the problems of inflation solely through the mechanism of monetary policy. We cannot sustain an incomes policy and have a very lax monetary policy at the same time. That is only to place intolerable strains upon the incomes policy and to make it increasingly difficult to maintain.
I do not at all agree with my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) on this issue. He seems to believe that we could completely restore price stability through the monetary mechanism. If I follow his argument correctly, he seems to believe that all price increases are relative increases. The other day he described import price increases as being merely relative price increases. From that phrase I assume that he believes that we can deal with the problem of inflation and imported inflation simply by keeping the supply of money constant, and that this would therefore drive down domestic prices so that eventually we would achieve price stability. In a situation in which we have had imported price rises of the magnitude that have occurred recently—commodity prices up 90 per cent. in a year and a half, import prices up 45 per cent. to 50 per cent. in the last year—it would require a considerable drop in domestic prices to compensate for those increases in import prices. If we had a drop in domestic prices to achieve that it would have to be a large one, which would create a good deal more than transitional unemployment. I do not believe that that is a practical method. Even if it were, it is not a politically acceptable solution.
Having made those objections to the views of my right hon. Friend I say that I believe that an incomes policy and a monetary policy have to go hand in hand. In the past year money supply has been expanding at a considerable rate, certainly at a rate above the increase in money incomes. I know that the Chancellor and the Chief Secretary have drawn the attention of the House on several occasions to the divergence in move-

ments between the figures of M1 and M3. I fully accept that the arbitraging factor—the movement from current account to deposit account—which occurs in the M3 figures could be relatively unimportant, and that if we extracted those figures from the M3 figures we would be left with a more realistic figure. But if that is so it does not make much sense to continue simply quoting the Ml figures because the exceptional factors which, as is always pointed out to us, are expanding M3 are the factors which are reducing M1—the movement from current accounts into deposit accounts. Surely one has to take an average of the Ml and M3 figures and perhaps to extract the arbitraging element from it, but either way it is clear that the rate of increase in money supply has, in the last one-and-a-half years, been considerably in advance of the rise in money incomes.
I do not think that one has to be an out-and-out Friedmanite or disciple of the Chicago school to feel that this policy entails considerable risks. There is a substantial body of evidence which points to the connection between money supply and inflation. Much of it refers to the United States. But even if one is agnostic and not certain about the effects of an increase in money supply here, the Government have, by any standard, been running a risk in allowing the increase in money supply to grow at the rate we have experienced in the last few months.
When we hear repeated assurances that steps will be taken to curb the money supply, it is difficult, in view of what has happened, not to come to the conclusion that the money supply has, to some extent, been a little out of control. Perhaps the reason for that is that earlier the Government were not willing to contemplate the prospect of higher interest rates. We know the political disadvantages and the disadvantages to industry of high interest rates, but the Government's policy from the beginning has pointed inevitably to high interest rates. It was apparent after the Budget that we were in for a period of high interest rates. The size of the Budget deficit, the decision not to support the gilt market, the decision to abandon competition in credit and the declaration that the money supply would be curbed


by higher interest rates were all matters which would inevitably lead to higher interest rates. I am surprised that the Treasury sometimes has appeared to be surprised at the subsequent effects of its own policy. I hope that the present period of high interest rates will not last long, but, in view of the Government's monetary policy, I believe that it will inevitably last some months.
I make these points not because I wish to appear to be anti-growth. I strongly approve of the Government's decision to go for a policy of growth. But we want sustained growth. We want to move on a path of greater growth which will last. Earlier I made some points about adjustments which could take place not because I wish the Government's policy to be changed but merely because I want to underwrite it and to ensure that it is sustained and continued.
The Government are right in giving great importance to a policy of growth because many of our problems—such as the problem of unemployment rates in the region, the problem of slum hospitals and slum schools or the problem of low wages—have resulted from the lack of economic growth. I am glad that the Government have decided to carry on with the policies pursued by my right hon. Friend the Member for Barnet (Mr. Maudling) when he was Chancellor of the Exchequer. I firmly believe that had my right hon. Friend been given the opportunity to continue with his policies we would have had a much higher rate of growth than the rate we had during the term of office of the Labour Government.

1.25 p.m.

Mr. Arthur Lewis: I do not think that anyone could object to the motion. My only reservation about it is that it does not go far enough. I wish to make a few remarks about what I feel should have been included in it, probably towards the end of it. I have to catch a train from London later, and, therefore, I apologise in advance if I leave the debate.
Listening to the hon. Member for Kingston-upon-Thames (Mr. Norman Lamont), one would have thought that the 1970 General Election had occurred hundreds of years ago. I have taken the trouble in recent weeks to ascertain how contradictory not only the statements

but the actions of the Government are to their election promises. I should probably incur your displeasure, Mr. Speaker, if I were to go on for hours listing the broken promises and U-turns of the Government. They were elected on a policy of growth. According to the Prime Minister, they are succeeding. In fact, their success is so great that we have to have a national emergency to deal with it.
Apparently, the poorest of the poorly paid in this country have to be viciously and savagely attacked by the Government. Realising that it is politically unwise for them to make the savage attacks, the Government appoint stooge boards, stooge committees and other stooges to do their dirty work for them. The savage attacks continue. The ambulance workers, nurses, dustmen, miners—all those whose wages are well below the national average—are being castigated and charged with causing the economic problems of inflation, which have, in fact, been created by the Government and which almost day by day are being exacerbated by Government action. When we ask the Government to take action to prevent the obvious abuses which are taking place, they do nothing.
When public opinion and hon. Members on this side of the House receive the support, which is not very often, of the media, and when the Press reluctantly supports the Labour Party, the Government promise action. I have in mind the question of Centre Point, about which the Government promised to take action. After years of obvious abuse, with properties remaining empty because it was financially advantageous to the speculators to keep them empty, the Government reluctantly say "We shall take action." Then what happens? The person who makes the promise is kicked out of his job. He is replaced by another Minister, who says that he will not take action. It is appropriate that I should mention this matter today. We are told today that there is to be a Government reshuffle—the "leaks" from Government Departments usually turn out to be correct—and that the present Secretary of State for the Environment is to lose office or is to be shifted. We shall probably be told that an attempt will be made to deal with the property speculators in Camden. But no action is ever taken.
If we achieve growth, there is the possibility, to put it no higher, of greater inflation. We suffer from inflation every day of the week. At one time the price of articles of food was increased by halfpennies and pennies at monthly intervals. Prices go up now not by ½d. and 1d. but by 3d. and 6d. virtually daily.
The Government used to blame the wicked trade unions for inflation, so they imposed a freeze. During the freeze prices went up much faster to a higher level. The Government could not break the trade unions, so they switched their policy. The said that inflation was due to snow in Siberia, the Russians wearing fur coats, droughts in some parts of the world and poor harvests. When that policy failed, the Prime Minister and his cohorts claimed that inflation was due to world prices. I do not say that the Prime Minister is mentally unstable—there is a right hon. Gentleman on the Government benches doing that—but it is strange that the Prime Minister who in June 1970 said that he would cut prices at a stroke has been unable to prevent a more rapid rise in prices than has ever occurred before. In wriggling out of that dilemma the Prime Minister blamed world prices.
Did the Prime Minister in June 1970 when he said that he would reduce prices at a stroke know that world prices affected prices in Britain? If so, why did he not promise to reduce prices at a stroke subject to world prices? If he did not know then that world prices affected our internal situation I suggest that there is something wrong with him.
The Prime Minister knows that, whereas world prices affect some commodities, by no stretch of the imagination can the dramatic rise in the price of certain commodities be attributed to the rise in world prices. In markets in Stalham, Evesham, North Walsham and Norwich I have seen, and on occasions purchased, lettuces for 10p and 15p and cabbages at 1p each. I have seen swedes sold at 5p and 10p per stone. I have seen tomatoes in the markets for 5p and 10p a pound and, at the peak period, 1p a pound. I have seen potatoes, carrots and onions for sale at similar low prices.
When I have gone round the towns and villages I have seen the 1p cabbage

being sold for 5p or 8p, tomatoes at 15p and 30p a pound and swedes at 4p a pound. Those prices are 800 per cent. or 900 per cent. above the prices in the market. The same can be said of fish and almost every item that goes into the housewife's shopping basket.
I raised this matter with the Minister, who passed the buck to another Minister. We talk of growth and expansion, but what is needed is a little less delay in answering mail from hon. Members. It takes three or four weeks to get even an acknowledgement. A substantive reply takes up to two months.
Having taken the matter up with one Minister who passed it to another, I passed it to the Prime Minister, who had promised open and honest government and said he would get things going, but he sat on it and passed it back to the Minister or to one of his boards. The boards take no action. The only boards that take action are those that are vindictively and spitefully, and almost daily, attacking the trade unions. One board has viciously attacked the AUEW by imposing fines. But when I report to the board firms which overcharge, it takes no action. When I report that firms are not complying with the pay and prices code by reporting higher profits, the board does not rush into the court to penalise them as happens with the trade unions.
I have reported dozens of cases of company directors who have increased their salaries both in phase I and in phase 2. I am not referring to Sir John Stratton or Sir John Clark, who worked a racket of alleged increased productivity to justify salary increases of thousands of pounds a year. The company directors' increases have been certified by a chartered accountant, but no Minister will take action. Again, the Prime Minister refused to take action, and so did the Price Board.
It is hypocritical for lion. Members to condemn the miners for asking for a wage which, if granted, would still put them below the national average wage, when those hon. Members get more in one day's tax-free expenses for travelling to Strasbourg to attend the so-called European Parliament than many surface miners get for a whole week's work. Some hon. Members get more in two or


three days than do many underground workers for a whole week. Those hon. Members who are hardly ever in the House because they are in Strasbourg have the audacity, on the infrequent occasions when they are here, as stooges of the Whips, to put down a motion condemning the miners for asking for an increase in wages to bring them up to the national average.
I support the motion, but there should be added to it words to the effect that the Government should take action to control any inflation which may result from expansion. The Government should control the property speculators and spivs. Instead, they go out of their way to encourage dishonest and crooked people, to the disadvantage of hardworking members of the public.
We see from today's Press that the Minister for Industry has admitted that he knows petrol rationing will encourage spivs and drones to set up a black market. He admits that the Government have slipped up and that there will be a blackmarket in petrol coupons. However, the Government's view is that this will make no difference because if people sell their petrol coupons this will make no difference to the general supply of petrol. This is the Government's attitude. If the property speculator makes money from untaxed dividends and returns, it does not matter because, the Government say, this is the normal ugly face of capitalism, or whatever the Prime Minister's expression was. The Government are not interested in shady happenings in Lonrho and goings on in the Cayman Islands and all the rest of it.
I am sorry that we have not present a Liberal Party spokesman. I make no particular complaint about that fact, because all the Liberals are probably busy in other parts of the country, but it is a little strange that almost every day we do not find any Liberals in the Chamber. I read on the "tape" a short time ago that the City has yet another fiasco. This time it involves a large banking company called Leasehold and County Properties, or, at any rate, a lovely, glorious name of that type—perhaps London and County Securities. It looks as though the company is going broke, and it is all very strange.
There has been a lot of talk about by-election successes and an alleged resurgence of the great Liberal advance and that the Liberals are to make an enormous inroad on Tory and Labour majorities. We are told that this will all be done by the Liberals and that they will show how the country should be managed. The Leader of the Liberal Party is one of the directors of the company that is going broke because it has got into difficulties. The amazing thing is that it will be bailed out of its troubles by none other than a banking concern whose Chairman is the Chairman of the 1922 Tory Committee. We now have the amazing spectacle of a great capitalist concern in the City, led by a Liberal, going broke and being aided, abetted and assisted by the Chairman of the Tory 1922 Committee. We seem to have a coalition in regard to the finances of this country.
My point in raising this matter is to show that these things are happening day in and day out and have been known to be happening by the Government. But the Government have never taken any interest in these matters. This company has been charging exorbitant interest rates for second mortgages. It was thanks only to the Press and hon. Members in this House that eventually that was stopped. The Government took no action. In fact, the Government have been shoving up interest rates so that their banker friends can make the biggest profits they have ever made. Most of the bankers are Tories and most banks contribute large amounts to Tory Party funds. Many Tory Members are directors of banking concerns. The chairman of the company I referred to, the Chairman of the 1922 Committee, is, I think, the right hon. Member for Taunton (Mr. du Cann), who is chairman of several other companies. If that right hon. Gentleman were here today, I would ask him what his division is, but I do not often see him in the House and so I cannot ask him. At any rate, he is a banker, and bankers in the main are Tories. The Tory Party in the main helps the bankers because they contribute large amounts to the Tory Party.
We all know that recently the Government, allegedly in an effort to help the building societies, imposed on the banks


an interest rate limit of 9½ per cent. But this applies only to small depositors. Anybody with large sums in the banks—wealthy people with sums of about £10,000—can deposit money and get any interest rate they like from the banks. Therefore, this is an unfair attack on poorer workers. It may be somebody like an old-age pensioner who after 40 or so years of hard work has managed by the sweat of his brow to save £1,000. He puts that sum on deposit into Barclays Bank but he is controlled by the Government—not by Barclays Bank—who tell the bank that it must not pay such a depositor more than 9½ per cent. But a good Tory depositor who has £100,000 to deposit—a man who has amassed that sum without working hard for it at the coal face, because he would never get it that way—can get 13, 14 or 15 per cent. on his money. That is the morality of this Government.
If the Government want to achieve expansion and certainly if they want 'o control inflation, they should stop these people at the higher level, making thousands of pounds overnight, rather than at the lower level. Let them also control the obscene salaries and increases given to these people.
I conclude by saying that it is unfair and dishonest and hypocritical for an hon. Member, either Labour or Conservative, or for a newspaper editor or a journalist or a commentator to be paid £30 or £40 for appearing on radio or television for two or three minutes—the sort of sum that most workers have to work hard for all the week. It is those same hon. Members, who earn that sort of money for appearing on television, who condemn the miners for earning £30 or £40 for a hard week's work. How can those people condemn such workers when they themselves, whether they be lawyers or whatever it may be, are earning £10,000 to £20,000 a year, plus expenses. Members of Parliament who can earn sums of this sort come to the House and condemn the miners and the ambulance workers. This also applies to newspaper editors who, while they themselves are earning £12,000 or £14,000 a year, plus expenses, condemn the nurses and the ambulance workers in fighting for increases.
If the Government were to condemn people of this sort, they would show that they really are in favour of honest open government. But we have not seen that so far.

1.48 p.m.

Mr. Alan Haselhurst: I do not usually try to intervene in economic debates, and I recognise that many of my right hon. and hon. Friends are more expert on these matters and more in touch with day-to-day economic affairs than I am. However, I felt somewhat emboldened to take part, having heard the remarks of the hon. Member for West Ham, North (Mr. Arthur Lewis). I am sure that his speech will be noted with affection and understanding by the people of the borough of Newham, but I do not think that it offered any solution to the country's economic problems.
I am pleased to participate in this debate, initiated by my hon. Friend the Member for Leek (Mr. Knox) because I, too, am an expansionist and wish to pin my colours to the mast in that respect. I hope that I may underscore some of my hon. Friend's points.
I suspect that a lot of people are by temperament either expansionists or re-strictionists. Temperamentally, I am an expansionist, because I think that it is miserable to be anything else.
We are constantly seeing things which require putting right. We are regaled by our constituents with cases which reveal the need for many more improvements in the fabric of our society. We are forced to tell them that, because of priorities, these matters cannot be put right until later. All the time we recognise that greater wealth must be obtained by, the country if we are to meet the faster all the many demands being made, and made quite properly. The demand for improvements, whether they be physical, in terms of buildings, or simply in social provisions, is becoming greater and greater.
I believe that it is right for the Government to seek an expansionist course out of the economic difficulties which have troubled the country for a very long time. They have pursued an expansionist course, underpinning it with the decision to take the country into the


European Economic Community. I believe that this was a wise course, which will help to give business the confidence that expansion, once begun, can be sustained and that the additional market can help to avoid a return to the difficulties of stop-go
I must say, in passing, that the net cost of Britain's entry into the Common Market, on the evidence of the first year, seems to be a somewhat paltry sum compared with many of the other burdens that the British economy may have to bear. I have in mind, for example, the additional rise in the price of oil. In my view we have got a pretty good bargain as the price of our entry into the Common Market.
We want to get our economy on to a continually expanding course, so that we keep up with the standards of our neighbour countries. If we do not do that we face the prospect of falling further and further behind them. I do not think that that is a vision that the British people will relish. However, the policy has its dangers. Everyone recognises that. But so do the alternative policies now being counselled in different quarters.
At this stage I should not like to see a return to policies of high taxation. We do not hear very much from the public these days about the unbearable levels of taxes. That is because they have reduced substantially during the lifetime of this Government. But I have no doubt that if taxes were increased once again the popular cry would be that taxation was taking too much out of the pay packet and that it was unfair that it should be so high.
High taxation would contribute to inflation. Therefore, if it is counselled that taxation should be increased as a means of reducing inflation, I am not sure how that can come about. If an increasing amount of money is taken out of the wage packet by taxation, that is likely to increase the demands for basic wages to be lifted. I do not believe that a course of high taxation would be very sensible.
On the other hand, I also do not believe that we should go in for policies likely to increase unemployment. If I am temperamentally an expansionist, part of my temperament is conditioned by the

fact that I do not believe that it is the job of those in politics to create large-scale unemployment. It is totally unacceptable. Unemployment should not be used as just another economic tool to right the economy.
It would be quite wrong to pursue policies deliberately designed to increase the number of unemployed to heights which those who advocate such a course are never prepared to define but which might result in very large numbers over a long period of time.

Mr. Jerry Wiggin: I agree with my hon. Friend's sentiments, but does he agree that in the present situation the total numbers unemployed in no way represent the true employment situation in many areas of the country? I am sure that in my hon. Friend's constituency there is a situation similar to that in my own, where it is impossible for employers to get even totally unskilled labour to do jobs. Do we not have to assess differently the way in which we measure unemployment?

Mr. Haselhurst: I agree entirely with my hon. Friend, and I shall have some comments to address to this matter of unemployment before I conclude my remarks.
When I say that the alternatives to expansion seem very undesirable, I put the question in the following form : what comfort would a low rate of growth in order to achieve a satisfactory balance of payments surplus bring to the mass of the British people if, with it, we had the features of high taxation and high unemployment? We saw this sequence of events played out in the lifetime of the Labour administration, and the British people did not greatly benefit from it.
I am inclined to agree with my hon. Friend the Member for Leek, who believes that it is possible that the British people will more readily accept continuing price inflation if they are able, by means of their incomes, to keep just ahead of it. We may be moving into a situation in which that becomes more readily acceptable to the people.
There is a danger in bringing expansion to a halt. We saw how difficult it was to get expansion going in the first


place, and we have seen how difficult it has been to get industrial development up to a satisfactory level. If it were brought to a halt now it would make it more difficult ever to restart the programme of investment by industry. Business and industry would doubt whether they could ever take the word of any Government, whatever the political complexion.
Demand at home has to be kept up to a certain level so as to sustain a continuing export effort. However favourable the terms of trade for the sale of British goods abroad, that in itself is not enough to maintain future exports at the level that we require.
The balance of payments situation cannot be dismissed as anything other than serious, but I am not convinced that the situation is hopeless and incapable of being rectified. Only in the past week I have been told by one of our largest industrial companies that, all other things being equal—and it was referring to oil supplies—it was expecting by the end of the year to bring its trading out of deficit and into a marked surplus. If that can be done by a very large industial concern, I have no reason to think that it is untypical of quite a large sector of British industry and therefore I believe that the Government's optimistic view of this matter can be sustained.
It seems extraordinary to panic about our balance of payments when we are relatively near, in the time scale, to a situation of having plentiful supplies of our own oil, which I believe will have an astonishingly favourable effect on the balance of payments. I hope, therefore, that the whole of the economic expansion upon which we are now launched will not founder completely when there are riches round the corner.
The world situation indicates that there could be dangers in changing the policy of expansion at present. There are clear signs that a downturn in world trading activity may have begun. If we advocate policies which would lead to greater unemployment, they could take effect at a time when unemployment had already begun to increase because of the effects of the world situation. It is well known that the effect on employment usually takes place 12 months or so after par-

ticular measures have been taken. We could be creating for ourselves a very bad unemployment situation 12 months from now if we were to over-react at this time.
I should be interested to hear from the Front Bench any further hints on the state of the borrowing requirement. I understand that it is not the custom to give information in the course of the year, but there seem to be suggestions that however serious the situation appeared to be at the time of the last Budget, it is not nearly so serious now, because of the buoyancy of tax revenue, for one thing. If this is to have a significant effect upon the remedies that people would counsel at this time, we need to know more about the present situation.
I now turn to employment, or unemployment, to which my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin) alluded. Like my hon. Friend the Member for Leek, I still believe that there are ways of taking some of the heat out of the present labour situation. My hon. Friend the Member for Croydon, North-West (Mr. Robert Taylor) doubted this. Yet he was referring to the situation in London and in London Transport in particular. As a daily user of the Victoria Line I feel somewhat irritated when I see fully automatic trains being manned when the people concerned could be redeployed to run trains on non-automatic lines. Therefore, I endorse what was said by my hon. Friend the Member for Leek about there being ways—that is but one—in which better use can be made of the labour employed by organisations and corporations.
I was interested to read the remarks by the General Secretary of the TUC, who is also an expansionist, urging the Government not to panic and change the whole nature of their policy. Surely, if there is continuing expansion it will be good not only for the confidence of industry in its investment programmes but for trade union policy on the use of labour.
If we reach a period during which high employment becomes the norm the unions will be more willing to see policies put into practice requiring people to move out of industries which are relatively over-staffed and go into others which are crying out for workers.


The whole atmosphere on that side of industry could be altered favourably by a continuing period of expansion.
Yesterday, the Department of Employment published details of the unemployment situation. One statistic caught my eye. Last month, for the first time, there was an indication of a fall in the numbers of those who had been unemployed for 52 weeks and more. A figure which had persistently stuck at over 160,000 since July 1972 came down last month to 142,600. That indicates that some of those who have been difficult to place in employment can now be placed, so there is still a little scope for easing the present situation.
I endorse what was said by my hon. Friends the Members for Leek and Kingston-upon-Thames (Mr. Norman Lament) about the earnings rule and the possibility of its being further eased. This point has been put to me by industrialists in my constituency. It seems to them sensible that there should be more inducement for elderly people to work when they could in many cases do valuable jobs. If this cannot be done over the country as a whole, I suggest that it might be done on an area by area basis, related to the amount of unemployment in particular regions.
Another group of people who are concealed in the total unemployment figures are those—I hasten to say that I do not in any anti-social sense call them malingerers—who look at the present situation, consider what they are able to obtain through social benefits whilst unemployed, look at the most likely jobs that are available, compare the take-home pay that they would get, and say : "It just is not worth it. Temperamentally we want to go out to work, but the sums are not good enough to persuade us to do so."
Is it not reasonable and far more important, in those circumstances, bearing in mind the nation's need, that, even if the income from social benefit were equal to employment, those people should be given every encouragement to do the jobs that the nation needs done rather than draw an equivalent sum in benefit? Therefore, in the areas where unemployment is now getting very low, I suggest that consideration should be given to reducing the amount of benefit. There should be safeguards—I do not wish to

penalise anyone who is genuinely unemployed—but it might be wise to consider the possibility of changing the calculation for those who are not determined to stay unemployed, but who say, "Why should we work whilst the benefits are calculated as they are?".
The more serious threat to expansion is the oil supply situation and the shortage that that is creating in terms of many raw materials that are either directly derived from oil or are being made less available because the production of factories dependent on oil is being slowed down. It is self-evident that if there is no oil our industrial expansion will suffer. But, before the situation reaches a calamitous stage, are there not other measures that the Government could consider in the interests of maintaining expansion and avoiding the unnecessary use of certain raw materials?
One problem put to me by industrialists concerns the many semi-manufactured goods that are going overseas—goods that are sorely needed by British industries, which would be exporting them as part of their final products, with a bigger labour content involved and therefore a larger return to this country in the end. They are having difficulty getting these products, because they are going out of the country. One wonders whether there should be a system of allocation to ensure the right priorities in terms of raw materials and semi-manufactured goods for those of our industries which will be exporters of final finished products. This very day a manufacturer of vital components for industry told me that when he sees the raw material that he badly needs going into toy factories he wonders whether we have our sense of priorities right.
These are difficult questions. If a toy factory cannot get its raw materials, unemployment may result. If we are to have to face, for some time, a shortage of vital raw materials such as oil, we surely should consider ways of getting the derivative product of oil to the industries which are most important to our economy instead of allowing them to go haphazardly, in any kind of pattern, throughout the country.
Those are serious difficulties for us. They represent a major threat to the whole prospect of expansion. The whole House must hope that, as a result of the


policy of the Arab countries, the situation will not become such that our whole prosperity will be ruined. The lack of oil could well bring expansion to an end, but I hope that no wilful decision by the Government will bring it to an end.

2.10 p.m.

Mr. Jerry Wiggin: I immediately apologise to my hon. Friend the Member for Leek (Mr. Knox) and to the House in general for my unavoidable absence earlier in the debate. I had expected to find more hon. Member's eager to speak on this important subject. However, I entered the House only to find that perhaps there would be time to make points about agriculture, a subject in which I am very interested and which plays an important part in the nation's well-being ; so I thought that I would take the opportunity to raise these points. I wish to make it clear that I meant no discourtesy to other hon. Members.
I want to take up a point made by my hon. Friend the Member for Middle-ton and Prestwich (Mr. Haselhurst) on the question of oil economies and the present energy crisis. It strikes me that, although obvious steps are being taken by the Government to cut down unnecessary usage of petrol in particular, we have by no means exhausted the many ways in which massive savings of fuel can be made. During the war we went in for daylight saving. That would give, easily and painlessly, a very substantial saving in lighting and heating costs, both of electricity and of oil. Many methods could be employed without impinging on the standard of living of the people. I wonder how many cars come into London each day with only one passenger. One does not have to stand very long by the roadside to realise what very poor use we make of available road transport.
There is no need to cut down the entertainment of the people. This was not found to be necessary during the war, when for very good reasons racing was kept going. I note with interest the way in which many football clubs have already managed to produce their own generating equipment to help save fuel.
The other day I visited an important new factory in a development area in Devon. As a result of fuel problems

last year, it has perforce had to install its own generator. Because of the Southwestern Electricity Board's tariff it was found that the use of this generator at certain times of the year resulted in a saving for the company of over £1,200 in electricity costs.
I believe that if an investigation were made of such possibilities across the board it would be found that we have a long way to go before we need to start talking about a halt to industrial expansion as a result of fuel shortage.
It may be that when these economies are made it still results at the end of the day in a shortfall, but I believe that Britain is relatively well placed compared with its industrial competitors such as the United States of America and Japan. We could well take advantage of this situation at least in the short term.
I turn to a subject which I understand has not yet been mentioned in any great detail, but I first remind the House that I have been a farmer and still have an interest in agriculture as a tenant. It is a pity that this subject has not had a full-scale debate on the Floor of the House since June 1970. I say that it is a pity because traditionally and rightly, certainly in the last Parliament, it was a very common subject for debate on Supply Days. The then Opposition found it necessary constantly to harry and criticise the Government on their deficiencies in agriculture. This Government can take it as a great compliment that the Labour Opposition have apparently not thought it necessary to criticise them on this matter.
I can remember clearly the general situation that appertained in agriculture in 1964. The fat that had accumulated as a result of the war years and food rationing and food shortages was to some extent being dissipated in increased costs. There is no doubt that the Government of those days took advantage of the farmers' rapid increase in efficiency which all the time was proceeding at an unprecedented rate, a rate which was the envy of many other industries. If some of our other traditional long-standing industries had expanded and had been as efficient as agriculture in the same period after the war, Britain would have nothing to fear in the economic battle that it seems to be permanently waging now.
But for the emergency price review in the autumn of 1970 there would have been more bankruptcies in agriculture than there had been in the 1930s. I say that with some knowledge. I accept that there were other factors and that it was not just the Government's failure to ensure that the industry was right. There were three bad years for farming in 1967, 1968 and 1969. Time after time the Government of the day blindly refused to see that a prosperous agriculture has much to contribute to Britain's economic prosperity.
I think I am right in saying that the value of agricultural production exceeds £2,500 million a year. This is money that is saved on our balance of payments. This figure exceeds the exports of the entire car industry, about which we hear so much and which we are constanly being told is so vital to our economic wellbeing. Yet time and again Governments seem to give too much priority to the car industry and not enough to agriculture.
I repeat that in the autumn of 1970 there was a massive injection of badly-needed money into agriculture, and with a sigh of relief British farmers got down to making that injection work for them. The farming industry is once again back to the situation it enjoyed in the early 1960s.
At a speech at North Fylde on 11th October my right hon. Friend the Minister of Agriculture, Fisheries and Food said :
As a result of our policies the industry has been in good heart over the last three years, its income has been rising and the general level of profitability is good. The survey which we have recently carried out with the National Farmers' Union confirms that, for the industry as a whole, this continues to be the case.
I do not propose only to praise the Government, because I believe that we have in one respect let down a certain section of the farming community, at least temporarily. In considering the overall situation, I think that the House will agree that farming is now in a position where it can afford to re-equip with the vital machinery which is so badly needed but which, tragically, British industry seems so unable to provide.
If ever there was an indicator of economic prosperity in the factories of Coventry, Dagenham, and elsewhere, it is that many major items of agricultural machinery, in some cases costing tens of

thousands of pounds, are not available and will not be available during the forthcoming season.

Rear-Admiral Morgan-Giles: My hon. Friend is making a most interesting point about large machinery. Like him, I represent an agricultural constituency, and I am sure he is aware that some of the smallest items are not available, including, even, steel for horseshoes.

Mr. Wiggin: The latter, in view of the energy crisis, must be an important consideration. I accept what my hon. and gallant Friend says, but I am rather cautious, because at the beginning of last season I made a similar statement and received an angry letter from a constituent. He was a retailer with a lot of stock in his yard. He wanted to know what I meant by suggesting that there was a shortage of machinery, when he had a good deal he was willing to sell. He admitted, however, that some tractors were then subject to an eight-month delivery period, and delivery dates have got longer since then.
The British farmer now has money available for this re-equipment to carry him over the next few years. Since farming is a seasonal industry, at the mercy of the weather, world prices, shortages and politics, it is necessary when the going is good to re-equip and get some "fat on one's back."
An important black spot which concerns many of my constituents, as well as smaller farmers in the West Country and Cheshire, is the present situation regarding feedingstuff costs and milk prices. I know that my right hon. Friend has made out a very good case in this respect. He said in the speech to which I referred earlier :
The longer-term prospects for milk production in this country are extremely good. The EEC's target price for milk is much higher than our present pool price and there is every prospect of an increase in the profitability of dairy farming here where we enjoy considerable natural advantages, when we have completed the transition to full EEC price levels. It would be a serious mistake for dairy farmers to take a short-term view based solely on the temporary difficulty over feed costs.
That may be the case, but it is very hard on men to see the capital value of their herds decrease because of economic pressure, and, because more and more


people are putting cattle on the market, to see their dairy production running not necessarily at a loss, but at a substantially reduced profit simply because the Government have been over-stubborn in not allowing these increases.
Far be it from me to suggest any increases in food prices, but to put 1p on a pint of milk would not, in terms of its value as food, be very unreasonable, and ½p or less would be enough to keep the dairy farmer at his past level of prosperity, which he thoroughly deserves if he is to continue in this arduous industry. There can be no doubt that it is an arduous industry. Any hon. Members who have been up at first light, or earlier, on wet winter mornings to struggle with forage for cattle and milk a herd of 60 or 70 cows before breakfast will know what I mean.
Careful study of the policy document on phase 3 shows, for example, that manufacturers are allowed to increase prices in order to make a reasonable return on their capital. The dairy farmer is not, at present-day prices, making a fair return on his capital. My right hon. Friend has said that he will deal with these matters at the next price review ; but that will not be until the end of March. Although that is earlier than usual, an exception should have been made in this case, without breaching anything, to allow the dairy farmer to get his just reward.
There is another important matter hanging over agriculture. We have the privilege of a Treasury Minister on the Front Bench, and I hope that I may direct his attention to the grave problems which many farmers will face as a result of steep increases in land values. Labour Members who speak about wealth tax and taxation of the rich are, I am sure, sincere in their intentions, but I am equally sure that they would not wish to see the destruction and fragmentation of the agricultural system that we have in this country.
A man with 200 acres of land will have to pay an extremely high level of death duty and may have to carry a high level of capital gains tax. The one advantage which this country has over the rest of the EEC is that the size of our farms, which are economically viable

in the twentieth century, allows for the use of the sort of machinery which was mentioned earlier. If our taxation system is to be so designed that in order to pay duty farms will have to be sold in whole or in part, this will be a disservice to the nation which future generations would find it hard to forgive.
There is also a substantial problem about new entrants into agriculture. I have never regarded agriculture as being so different from any other industry. I have never thought that one should be able to start up a steel business or a chemical factory just through hard work, unless there was heavy capital investment. Agriculture should be treated, to some extent, on the same basis as industry in general. Enormous increases in the capital investment required precludes the ordinary man, however hard he works, from gaining entry to the industry. There are other matters, such as land tenure, that I could discourse about but they are not precisely within the terms of the motion and T would not wish to be out of order.
I turn now to horticulture, which is often forgotten in the context of our food production. The hon. Member for West Ham, North (Mr. Arthur Lewis), whose departure from the Chamber seems to have been as sudden as his arrival, spoke of vegetable costs. I hoped that he was going to move on to a most interesting discourse about the profitability of the production of our basic green vegetables. But, alas, he seemed to be more concerned with retailers' margins.
I wish to draw attention to some of the increases in costs which horticulturists will have to carry in the coming year. There are bound to be increases in fuel costs, but there are other commodities, such as polythene and equipment, which have increased in cost by 30 or 40 per cent., or, in some cases, 100 per cent., since the past season.
In the highly competitive business in which growers compete against one another, it is not always easy to pass on costs. British people have for too long had green vegetables at a cost which has been too low in relation to the profitability of the producer. I do not wish to be drawn into a long argument about food prices, but there is a problem as to how we are to produce the best possible quality of


green vegetables, pack them, and transport them to the consumer in the big cities at a level competitive with the highly efficient people who are operating in horticulture, some of them on the other side of the Channel. Too often we forget these people.
There is a great deal of worry at present among some of my glasshouse growers about oil. I hope that those who are responsible for making these things clear will emphasise the fact that the glasshouse grower has been placed in a priority bracket for the rationing of oil. A glasshouse grower cannot tolerate much of a cut when the temperature outside is around freezing point. He cannot say "I shall reduce my demand by 10 per cent.", because his tomatoes will die if he does. Others are in the same boat. A glass manufacturer cannot switch his furnace on and off, because the glass will go solid. The same applies to glasshouse growers. I hope that this misapprehension can be stilled as soon as possible.
I turn briefly to another aspect of economic expansion. I hope that the House will forgive me for making a constituency point. It must be clear to those who study the way in which our national expenditure is allocated that to some extent the increase of expenditure on such essential items as schools, hospitals and roads is geared to the expansion taking place within the economy.
In my constituency of Weston-super-Mare we have been waiting for 18 years for a new hospital. Finally, the present Government bought the site in 1971. A design team was assembled, and work started on the planning and architecture of the building. In July of this year it became clear that the hospitals at Barnstaple and Plymouth had taken all the available funds for hospital building in the South-West for the forthcoming years, with the tragic and disastrous result that our hospital is to be postponed. Without economic growth that postponement could last for ever, I suppose. That is quite unacceptable. It is yet another reason why the Government must stick to their guns and continue with their present plans for growth. In this particular case we want a hospital. I shall harry the Treasury as best I can to give to the Department of Health and Social Security extra funds for this essential

purpose. Without this, the health of my constituents will suffer, and that I could not tolerate.
The opposite view to that of the motion must surely be that if we have no expansion we must have contraction. Other hon. Members have put better than I could the evil effects of economic contraction. In the particular area which I have covered, and which other hon. Members have not, it is more than ever important that for the future prosperity of Britain, the increase of its wealth and the well-being and strategic security of its people, food production should be considered a priority, a continuing priority. A Government who forget the farmers will ultimately pay the price.

2.34 p.m.

Rear-Admiral Morgan-Giles: In this debate about economic expansion it is, perhaps, no coincidence that I, too, want to speak about agriculture. My hon. Friend the Member for Weston-super-Mare (Mr. Wiggin) made a very interesting speech. The fact that we both wish to speak about agriculture indicates how vital it is to our economic expansion. I ought to explain that I have an interest in the subject because I am a farmer in my constituency, but that constituency is largely a farming constituency anyway.
It used to be said that there were three good ways of losing money—racehorses were the quickest, women the pleasantest, and agriculture the most certain! I am glad to say that although the first two ways may still be true, the bit about agriculture is true no longer. For this we have to thank the policies of the present Government, who have consistently supported the agriculture industry in a way which the Labour Party, unfortunately, do not seem to understand. There is always more hammer than sickle about Socialism. The burden of my speech is to ask the Government to continue their good work in support of agriculture, just because it is so necessary for our balance of payments and the continued internal growth of our economy.
There are some particular problems which need attention and of which I particularly wish the Government to be aware. The first is the cost of feeding stuffs. This is the most urgent problem. It was well covered by my hon. Friend


the Member for Weston-super-Mare. However, I should like to add that we were told by the Minister of Agriculture in a recent speech that "he hoped that milk producers would not alter their long-term plans." That is fine. Let us hope that the long-term prospect for milk producers is good. But the Minister must also take into account what his long-term plans will be if, because of short-term difficulties, the small milk producers cut their herds simply because they cannot cope with things as they are and the national herd of dairy cattle is allowed to be diminished. I have tabled a Question about the retail price of milk, so I shall not ask the Financial Secretary to deal with that matter now.
I pass to the next difficulty which faces all of us, and faces the agricultural community in a particularly aggravated form—the matter of fuel supplies. Ploughing is still going on. This requires a lot of fuel, tractors being used in low gear, and so on. Also I have big horticultural undertakings in my constituency which are anxious about maintaining the warmth in their glasshouses.
A more indirect question is that concerning the ordinary living conditions for families in the rural countryside and the means by which people who work on farms and in the agriculture industry are to get their children to school, for example, or to do their shopping or visit the doctor, and so on, if special provision is not made for them in the allocation of petrol. This applies not only to farmers. It emphasises the tremendous difference between life in the rural areas and city areas, especially now that rural bus services have been so reduced.
My third point is one for the Treasury, so I am particularly happy that we have a Treasury Minister on the Government Front Bench. I am glad that he is smiling. I hope that his smile means that he will be receptive to the suggestion for a three-years' running average for taxation purposes for farmers—taking one year with another, over three years. This seems to be a fair thing to do for farmers, whose ups and downs of profitability depend on so many unpredictable factors, such as the weather. It is, perhaps, even more important at present, when the cost of borrowing is so great. I hope that the Minister will replace his

smile by a nod when I ask him whether he has taken on board this point about farmers wanting a three-years' running average for taxation. I am sorry to see that he has not nodded.

Mr. Higgins: Mr. Higgins indicated assent.

Rear-Admiral Morgan-Giles: The Minister has nodded. If farmers' financal margins were better, through either the three-year running average of which I have spoken or other means by which the Government could assist them, they could pay better wages to farm workers.
I pay tribute to our farm workers. Nowadays they are very skilled men and are becoming more so every year. They are not to be thought of as just the hewers of wood and the drawers of water, which possibly they used to be in centuries gone by. Wages are relatively low, especially as they nowadays handle complicated machinery. However, I am sure that most farm workers would not wish to change places with factory workers. I pay tribute to farm workers and the job which they do, but I also pay tribute to their wives. I am not sure if I am in order to speak a dead language, but there is a fundamental truth in the expression that Agricola colit agros : uxor domum tuetur. In other words, the farmer tills the fields : his wife takes care of the home.
The next point is another Treasury one—the present enormously inflated value of farming land. This makes it extremely difficult for young farmers to get into farming on their own account.
It is somewhat regrettable that there has recently been so much institutional buying of farms, as a hedge against inflation. Further, there are the most extraordinary anomalies regarding death duties and "deemed disposal" for capital gains. I must declare an interest. One of my family is a minor, and a farm is in trust for him. It was put into trust when the land had a value of about £200 an acre. Were he to come of age and inherit the land today he would have to pay capital gains on land which now has a value of well over £1,000 an acre. Unless the Treasury grasp this nettle—I want an even more urgent nod from the Minister—we shall in the course of a generation or two have the fragmentation of farms and end up with 5-acre plots.
Next, planning permission in rural areas is, broadly speaking, far too restrictive. My constituency mail is full of a regular pattern of letters. For example, there is an old man who has an arthritic hip and who no longer can dig his large garden. A son who is getting married wants to build a bungalow in the back garden but is not allowed to do so for what seems to be a pettifogging reason. Such cases come to me all too frequently.
It is most frustrating to be given absurd reasons for refusal. The matter then has to go to appeal, where it is often turned down again. The whole process of appeal is clogged and constipated. I urge that a directive should go out to local authorities to the effect that their planning committees should be requested to reconsider the whole subject and to give planning permission far more generously. If in doubt, as I said in a recent letter to the Press, they should give rather than withhold permission.
The farmer next door to me has a large farm. He is a most industrious farmer. He wants to erect a building for another worker. He farms intensively and has some watercress beds, which are labour-intensive. He has applied for planning permission for a cottage which happens to be immediately opposite the end of the drive to my house. If anybody in the county were in a position to object to this building, it would be me : however, I am entirely in favour of planning permission being granted. I have told the planning committee of my attitude. Nevertheless, planning permission has been refused. The matter has gone to appeal and again been refused. There is no valid reason which any sensible man could understand for not allowing a house to be built on the site concerned. Incidentally, it would be next door to a house which has been there for many years. We shall not solve the difficulty of the housing shortage and the high cost of housing land unless we build in marginal places in rural areas.
Also, I urge the Government to compensate farmers in the most generous terms when their land is taken over for the building of a road or for other purposes. In my constituency there has been great controversy about the M3 motorway. A lot of objections have been raised by those concerned about the road

going so close to Winchester. But the most reasonable man is a farmer whose land will be cut in half by the proposed route. The farmer is not happy about the matter, but he accepts the inevitable. He accepts that his herd will be cut off from the milking parlour. A man in those circumstances, whose land is spoilt by such a development, must receive generous and comprehensive compensation.
Although we talk about economic expansion we may be in for a real blizzard. The Government would be ill-advised to turn their backs on the wartime concept of "Digging for Victory". In these days of frozen peas, people have gardens but they do not all dig and cultivate them as energetically as they did in the past. The idea of allotments is dying out. There is much to be done, and such activity could make a big difference to the economy in the short term.
We have an admirable Minister of Agriculture, Fisheries and Food. He well understands the problems of agriculture. Many of my right hon. and hon. Friends hear the early morning broadcasts which he makes from his farm. The Government must not pay mere lip service to the importance of agriculture as an essential part of our economic expansion ; they must recognise that the part it plays is vital.

2.48 p.m.

Mr. Robert Sheldon: The whole House has taken some advantage from the motion introduced by the hon. Member for Leek (Mr. Knox) but perhaps not as much advantage as the hon. Gentleman might have hoped for. That is understandable, because we have had a number of economic debates in the past few weeks. However, the motion is important as it has given us an opportunity, which some hon. Members have seized, to concentrate on growth to the exclusion of some other economic matters which so frequently occupy our time.
I begin in accordance with the tone which was set by the hon. Member for Leek. I accept that growth is probably the most serious economic matter for us to consider in the long term. Before going into certain aspects of it I must explain my attitude, which is, I am sure, the attitude of many right hon. and hon.


Members. It was formed in the days before we were concerned with such matters as oil crises. It is clear that the impact of the oil shortage on growth, if it were to continue, would be profound. The prospects for growth without oil are limited. I suppose it could be said that, given an oil shortage, all bets on growth are off.
Most of what we have to say is on the assumption that the oil shortage, even though it may continue, will be kept under some sort of control and that we shall be able to proceed to the days of North Sea oil. That is the period between now and the time when North Sea oil comes to relieve our shortages in a reasonably satisfactory manner. One of the things that the hon. Member for Leek took some delight in is that the argument has shifted considerably during the past 10 years.
Few people now do not accept that one of the influences working towards a higher level of growth is a fairly high demand. Those who have advocated high growth have been able to show that the level of confidence and high demand engendered both in employers and in employees is considerably conducive to a higher level of growth, which would not be achieved without more difficulty if the level of demand were not so high.
Here I must regretfully come into a more controversial area, not because I want to reduce the debate to anything approaching the kind of "yah-boo" debate we so often have on economic matters, but because it is important to understand the way in which the climate of confidence has altered during the lifetime of the last Labour and present Conservative Governments. When the present Government were converted to growth—I warmly welcomed it—they made a number of mistakes, as any convert makes in his initial enthusiasm. They got one or two things wrong early on.
First, the question of growth was largely one of getting an undervalued exchange rate and being able to produce the shift into exports from which a long-term period of a high growth rate could be sustained. What is extremely important here is that this opportunity should be encouraged and

anything that stands in the way should be removed. All this sounds self-evident, and I wish that it were truly so.
The difficulty, however, is in the person of the Secretary of State for Trade and Industry. We hear from him such nonsenses that they cannot but fail to reduce the level of confidence in industry. I want to say something about the trick of getting confidence. What needs to be done is to take certain action so that industry believes in the long-term future of the economy while the Government are taking the short-term measures which may be required. The aim is to encourage industry to expand while still enabling the Government to control the economy in its day-to-day short-term operations.
The Government are trying to bring this off, but the Secretary of State for Trade and Industry makes what, I suppose, can only be called fatuous comments, telling us how the economy is going from good to better and from better to better and better still. He is even trying to tell industrialists how to conduct their pricing policies, and it astonishes me how they are able to accept information like that coming from the right hon. Gentleman.
There are various ways of carrying out the trick of getting confidence. The Labour Government were successful in at least one part. They introduced investment grants, which provided security and certainty, and, therefore, confidence, that investment would cost very much less than it would without the grants, taking into account the variables of profitability in the short term.

Rear-Admiral Morgan-Giles: This is not the sort of occasion when we bandy party point about, and I do not wish to do so. But, when talking of confidence, will not the hon. Gentleman recognise that the TUC and the Labour Party have a very big contribution to make towards confidence in industry by way of industrial relations?

Mr. Sheldon: I do not think that comment adds very much to the debate. What is important here is that industry should have confidence when it lays down its investment at times when it is not being as profitable as it would like to be. The hon. Member for Leek was


correct in saying that if there is high demand and industry is doing very well, it will have more confidence in placing business ahead. The trouble is that we are in a situation in which that kind of confidence has been shattered, and it is not restored by optimistic statements made by the Secretary of State. It is only if people feel sure that they are going to have higher demand in future that they will invest in the future, basing their investment plans on the expectation of higher demand and growth.
But all this has proved very difficult because the Government began by frightening both sides of industry. At least they were impartial in that. They talked about "lame duckery" and "standing on your own feet" and scared industry. How else can one explain the fact that investment fell so dramatically year after year after the Government came to power? I deplore such a situation because this is a matter on which there should be no party politics. Agreement about it should have been reached long ago.
Whether one obtains benefits by a high scale of devaluation or by measures like import controls, control of deposits and export assistance, is quite important, but the latter courses are only temporary expedients, which do not give to manufacturers the incentive to invest in production, whereas devaluation makes sure that our export prices are competitive and will remain so. One of the problems of the early 1960s was that we had an overvalued pound and failing devolution there was nothing we could do to create these export markets. The right hon. Gentleman the Member for Barnet (Mr. Maudling) therefore sought growth through high levels of demand.
In a situation like that, by all means, if one believes in growth, one should take those risks, but with a devalued pound such risk-taking is not nearly so necessary. When one takes those risks, there are always the industrialists who proclaim that such policies will come to an end, and this is the situation at present. There are people in industry failing to invest because they do not believe that high demand by itself will lead to the promised breakthrough.
These are the people whom the Government are trying to influence. If they are not influencing them, it is no use

blaming those concerned and trying to tell them, as did the Secretary of State for Trade and Industry recently, to improve their margins and their profits. If industry needs to be given that advice, we may as well pack up now. If industry does not know how to organise its pricing policy and has to wait for the Government to direct it, matters have come to a pretty pass. Such a policy does not restore confidence ; it makes industry more frightened.
We need this fundamental import shift, and the devalued pound should enable us to get it, but we must make sure that there is greater profitability in our industry than comes from the City and from property. The trouble is that so much of the wealth of this country comes from the City and from property rather than from industry. That frightens me.
These days, few of us would objectively advise a bright young man wanting to make his future and earn a great deal of money to go into industry. Many would advise him to go into the City or into property. That is not the case with the competitors of British industry. In Japanese factories and in the factories of Mercedes Benz and Ferrari, for instance, which many hon. Members have visited, one has been able to contrast the bright young men of Britain with their foreign counterparts. Those who proudly assert the pre-eminence of our City institutions, which is largely true, must realise that for that preeminence we pay a high price. It may be that this change has been one of limited value.
One main reason for the export shift, which is so crucial, has been the end of the Commonwealth. I always believed that the reasons for the need for the export shift resulted from the decline of Commonwealth trade. That, of course, was a tied trade. We did not control the Commonwealth in its latter days as we did in the days of empire. However, we always underestimated the amount of control which we still exerted up to the late 1950s and into the 1960s.
We controlled the tariffs and so made the trading arrangements for Ghana, Nigeria, East Africa and so on. Although we said that it was a bilateral trade and was fairly conducted, that those countries were supplying us with


raw materials and we sold them our manufactured goods, that kind of arrangement was one-sided. The advantages that we obtained have nearly come to an end.
There are some people—getting old, admittedly—who have a preference still for our goods over those of other countries. There are still electric power stations overseas using our equipment and spare parts. There are still people who are more familiar with British industry than with the industry of other countries. But that advantage has declined enormously. Up to the end of 1950s nearly half our exports went to the Commonwealth—about 45 per cent.—and the figure now is 20 per cent. It has declined steadily, and continues so to do.
It has been this fundamental shift that has required us to introduce the greater part of our exports into other markets. One of our main tasks has been to introduce this export shift either by greater devaluation than we ever thought necessary, or in some other way. My contention was that there was no suitable alternative to having a considerably under-valued pound. At the time the Government carried out their major U-turn from non-intervention in industry to their commitment to economic growth we saw a number of measures reversed. I will not go into them in detail. What happened this year? Until this year it was the policy of the Government to get very high rates of economic growth. The Prime Minister at that time was talking about 5 per cent., and so was the Chancellor. As we know, the Prime Minister compared the performance of the United Kingdom with that of Japan and Western Europe and said that if they could get those high levels of growth Britain could, too. It is clear that the right hon. Gentleman was thinking in terms of 5 per cent. and, at that time, perhaps even higher rates of expansion. What has happened is that now we are back with 3–3½ per cent. growth, which is reckoned to be the same as the level of productive potential. One thing is clear. If we are to get rates of expansion very much higher than what has been thought to be our productive potential in the past we shall get higher rates of inflation.
It is one thing to sacrifice high rates of inflation for high rates of growth, but it is quite another to accept levels of inflation of 11 per cent. and 12 per cent. if all we get at the end of the day is 3–3½ per cent. productive potential. By all means make the sacrifices. I thought it was worth while in the middle 1960s, with or without devaluation, to have a high level of demand that would mean some sacrifice in lifting up the rates of inflation from, say, 4 per cent. or even 5 per cent. to such levels as 6 per cent. or, even, inconceivable as it seemed at that time, possibly 7 per cent. To accept levels of inflation of 11 per cent. and 12 per cent. just to get 3 per cent. or 3½ per cent. is an equation that few people can welcome with any degree of satisfaction.
What do we mean by our "productive potential"? We know what the Treasury means. It bases it on some formula of unemployment and increase of production. One of the major damages that we have done results from thinking in these terms rather than thinking of what it means on the factory floor. We know well that productive potential can be limitless, can be enormously greater than this. There are some economists whom I greatly respect who believe that the very definition of productive potential has in itself been a limiting factor.
There are levels of inflation at present of probably 12 per cent. to 13 per cent. I know that the figures show only 9 per cent. We know that this underestimates real inflation. It fails to take into account the decline in our services which one day will have to be restored. It fails to take into account certain shortages which cost us money. This is equivalent, I suppose, to living off our capital. Certainly it is equivalent to a rate of inflation higher than that published at present.
What we need to understand is that these levels of inflation now being anticipated and planned for next year have to be paid as the price for a rate of growth which only just moves at the same rate as the expansion of industry. Therefore, when the Chancellor of the Exchequer budgeted for a deficit of historic proportions, and for an increase in the money supply to which the hon. Member for Kingston-upon-Thames (Mr. Norman Lamont) referred, so that as a


result inflation would be higher, one thing was clear : he did not take that action for a rate of growth of 3 to 3½ per cent. That would have been not merely folly but almost criminal negligence.
The right hon. Gentleman could not have introduced the mortgage subsidy of £15 million if he thought that interest rates would go as high as they have done. He failed to understand the simple consequence of his actions. The hon. Member for Kingston-upon-Thames clearly pointed this out. If one launches that amount of money, if one launches a policy of high rates of inflation, these are the consequences of one's action. Although there are people who might have said that those actions would have been acceptable if we had had the rates of growth about which the Prime Minister spoke at the beginning of the year, few people can now argue that they have been a success.
When the Prime Minister talks about the problems of success, he fails to take into account the question of investment. He said in reply to a question in the House that he did not believe that high rates of interest would discourage investment. The only retort which can be made to that is that if he did not believe that they would discourage investment, what sort of expenditure did he believe they would discourage? It is this kind of capital expenditure, this kind of expenditure as a whole, which is discouraged by what happens to interest levels.
No manufacturer has certainty or confidence in the future to the extent that he will expend large sums of money purely on the basis of an optimistic forecast by a Minister, however eminent. In the past there have been so many "false dawns" that industry is shattered and has failed to take account even of the advantages which it possesses.
This debate has enabled us to cover some of the wider points which we discuss all too rarely. This is not an easy time for those who believe in high levels of growth for this country. Growth will come largely from industry. The Government must go a long way before they can give industry the confidence which it requires.

3.14 p.m.

The Financial Secretary to the Treasury (Mr. Terence Higgins): We have had a

wide-ranging debate covering virtually every aspect of economic policy. I should like to deal with a considerable number of the points which have been made. I do not promise to cover every one of them. For example, I hope that my hon. and gallant Friend the Member for Winchester (Rear-Admiral Morgan-Giles) will appreciate that the points he raised are more appropriate for reference to my right hon. Friend the Minister of Agriculture, Fisheries and Food.

Rear-Admiral Morgan-Giles: Rear-Admiral Morgan-Giles rose—

Mr. Higgins: I have very little time. I have taken careful note of what my hon. Friend said, so far as it affects the Treasury, but much of the substance is a matter for my hon. Friend.
I am sure that the House will be glad that my hon. Friend the Member for Leek (Mr. Knox) has taken this opportunity to raise the whole question of economic growth, to which the Government attach high priority. No one is more enthusiastic for or more fervent in his advocacy of growth than is my hon. Friend. I know that both from listening to him in the House and from recently having had the pleasure of visiting his constituency. I know that he is anxious to convey, inside and outside the House, the great importance of growth.
I think that my hon. Friend will agree that it is also important to get over to people just what economic growth means. Too often economists get tied up in their own jargon and do not clearly convey to the man in the street what they are talking about. It is no hardship for me to speak about growth. In espousing this cause my hon. Friend knows that he is preaching to the converted. That is also true of the hon. Member for Ashton-under-Lyne (Mr. Sheldon).
The Government have repeatedly shown the importance which they attach to growth. It is a question not only of raising the standard of living in the country as a whole but of ensuring that we have the real resources to improve the social services, roads, hospitals and schools. My hon. Friend the Member for Weston-super-Mare (Mr. Wiggin) attached particular importance to the need to maintain hospital building. Growth means that we have more money available to help the less developed


countries, and labour relations become easier in a climate of rising prosperity. Growth can help us to solve many of the problems which face the industrial world and to deal with the problem of inflation, which was referred to by the hon. Member for Ashton-under-Lyne.
I do not accept the view of the relationship between growth and inflation which the hon. Member for Ashton-under-Lyne put before the House. Ministers, perhaps Treasury Ministers in particular, are criticised for being over-optimistic. I do not believe that the views expressed by the Government have been or are over-optimistic. In my view we have an unprecedented opportunity for achieving a fast and sustainable rate of economic growth. A great many pitfalls and mistakes can be made, but the Government are determined to avoid them.
There are many threats, internal and external, to the achievement of our objective, of which many hon. Members have spoken. To take a realistic view, what is of great importance is that we have an opportunity that we have never had before.
The position at present is that the economy can reasonably claim to be on course. Its rate of growth is in line with the Budget forecast of an average of 5 per cent. per annum over the 18 months to the middle of 1974. My right hon. Friend made clear, at the time of the Budget, that it was intended that during the later part of the period the rate of growth would gradually come into line with the growth of productive potential. That is what my right hon. Friend planned and that is what is happening. We expect this more moderate rate of growth to continue during 1974. The crucial point that I make in answer to my hon. Friend the Member for Leek is that, in part, the growth of the past two years represents a taking up of the slack in the economy. This is a slack which resulted, to a considerable degree, from the restrictive measures taken by the Labour Government and the severity of their effect, it must be confessed, was foreseen by neither side of the House. Now that the slack has been largely used up, it is dangerous and profitless to try to expand demand faster than the growth

rate of productive potential, because this would mean a situation of excess demand which, it is generally, if not universally, accepted, would be a dangerous situation.
What we have been doing is seeking to cope with a situation where on the one hand we have not mopped up excess capacity in the economy and on the other hand where we are bringing the movement in demand into line with productive potential. This is not something which previous Governments have managed to achieve. They have adopted policies which came to be stigmatised over the years as stop-go economics. I believe that we have a real opportunity to avoid that danger and to get the path of the economy right. Demand in the economy has already begun to slow down on the lines I have just mentioned.
Over a period of years the rate at which the economy can grow depends on the underlying growth in productivity potential—that is to say, the rate at which we can increase capacity to produce goods and services. The factors which determine this are capital stock, changes in working population, hours of work and so on. In the past the productivity potential of the United Kingdom economy seems to have been growing substantially more slowly than most of our competitors' economies. Our rate of increase in gross domestic product has been below that of other countries. Throughout the 1960s gross domestic product in the United Kingdom was 2¾ per cent., but in France and Germany the figure was 5 per cent., in Italy 5½ per cent., in Japan 11 per cent. and in the United States 4 per cent. But as my right hon. Friend the Chancellor pointed out in his Budget speech there is no law of nature that states that we in this country need increase our prosperity at a slower rate than that in other countries. Therefore it is important to underline that point but at the same time recognise that the rate of growth in productive potential is not something which can happen overnight.
The policy which we have adopted aims at mopping up excess capacity, getting the economy on the right path and seeking to raise the level of productive potential. This aim is recognised in this House and also outside in the CBI and TUC.
My hon. Friend the Member for Middleton and Prestwich (Mr. Haselhurst) referred to a recent speech by Mr. Len Murray and I think that he must have been surprised by the small number of speeches from the Labour Benches in support of the case which he put forward. I do not think the case for growth is seriously challenged.
We must look at the matter in historical perspective—we need to look at the position in the past as well as to look at the future. I was somewhat surprised that the hon. Member for Loughborough (Mr. Cronin) did not seem to take this historic view. It is worth emphasising the achievements of the Conservative Government as I sought to do in an intervention in the hon. Gentleman's speech. The standard of living measured by real personal disposable income per head rose during the five-and-a-half years between the fourth quarter of 1964 and the second quarter of 1970—that is to say during the period of Labour Government—by 8½ per cent. The corresponding figure for the three-and-a-half years between the second quarter of 1970 and the second quarter of 1973—that is to say during the present administration—was 13½ per cent. Although I have always had doubts about converting figures to annual rates, at the annual rate the standard of living during the first period of the Labour administration rose by 1½ per cent. During the second period of three years it rose by 4½ per cent. a year. That is a considerable achievement, and one which the Government can reasonably feel ought to be compared with that of the Opposition who now criticise the line that we have taken and the way in which the economy has been managed.
The rise in living standards in 1972 was a record figure. At any rate, it was the highest for at least 20 years. I think that there is every reason to suppose that we shall continue to see a situation where economic growth is fostered by the Government's policies.
What we have achieved has not been merely in terms of certain sections of the community. The hon. Member for Loughborough (Mr. Cronin) suggested that the position had been unfair on the low paid. I do not think that that is a sustainable view if one looks at the figures.
In the latest issue of Economic Progress Report for the coming month it is interesting to look at the annual changes in real personal disposable income per head which show clearly what progress has been made. That does not mean that we have any reason to be complacent about the present situation. Nor does it mean that we do not need to continue to give attention to the very many matters which my hon. Friend the Member for Leek mentioned in his speech.
In answering the points made by my hon. Friends there are two main areas on which I want to concentrate. My hon. Friend the Member for Kingston-upon-Thames (Mr. Norman Lamont) made a number of points relating to what might be termed the composition of demand. In effect, he asked whether it was the case that the likely changes in consumption and public expenditure would leave room for investment and exports.
This is a crucial question. During the transitional period to the growth rate of about 3½ per cent. a year the aim has been to slow down the rate of consumers' expenditure and Government expenditure. This is not merely in order to affect the overall growth rate. It is also designed to ensure that within the overall rate of 3½ per cent. there will be room for industrial investment and exports to rise faster than the overall average—industrial investment because this is vital if we are to ensure that the rate of growth is sustained in the medium term, and exports in order to secure through time the required improvement in the foreign balance.
Making room for this switch in resource terms is not quite as large a task as it first appears because manufacturing investment, despite its crucial importance to the economy, claims only a relatively small share in the total demand.
If we look at the changes which have been taking place towards this switch of resources and we take consumption first, in the third quarter of the year the volume of consumers' expenditure was about 3½ per cent. higher than a year earlier. In the fourth quarter of 1972 the corresponding figure was nearly 6½ per cent. There has in fact already been a sharp slowing down in the rate of increase. Between the second and third quarters of this year the volume of consumers' expenditure increased by 1 per cent., but this somewhat


exaggerates the current rate of increase because of the erratic pattern of consumption during the first half which in turn was due to the effect of VAT on the timing of retail sales. During the first quarter of the year sales of consumer durables were abnormally high and there was a reaction to this in the second quarter followed by a recovery in the third.
The change in the pattern of demand has been such that the level of consumption has fallen in much the same way as would be consistent with the view taken by my right hon. Friend the Chancellor of the Exchequer at the time of his last budget. That does not mean that there will be no growth in consumer expenditure. There will be a continuing increase, but the composition of demand is changing.
We also expect the growth of public expenditure to moderate. As the House knows, my right hon. Friend announced substantial cuts in public expenditure last May. Further cuts were announced last month when the stage 3 consultative document was introduced. The May cuts were on a number of specific items of which I need not remind the House. There was a considerable saving in the planned rate of public expenditure.
Taking those two factors together, it is clear that the change in the composition of demand is such that it will be consistent with our overall aim for the economy, particularly regarding investment and exports. I shall return to those matters later.
My hon. Friend the Member for Walthamstow, East (Mr. Michael McNair-Wilson) stressed the importance of technology and improvements in technology with particular emphasis on automation. He said that the prospects for increases in the size of the labour force were such that they would provide only a limited amount of extra resources. I am sure my hon. Friend is right that improvements in technology and automation in response to the prices of various factors for production, whether capital or labour, are of extreme importance to growth in the economy.
My hon. Friend the Member for Kingston-upon-Thames referred in some detail to the problems of retraining. This

is an area where the Government have taken steps to ensure that progress is made.
I turn now to investment, on which the hon. Member for Ashton-under-Lyne and my hon. Friend the Member for Leek put particular emphasis. My hon. Friend said that after each stop in economic activity in the past it has been more difficult to get investment going again. There is a great deal of truth in that.
At all events, as I told the House yesterday in answer to a Question, the most recent survey of the investment intentions of industrial companies shows a substantial predicted rise. The survey, taken in August and September, predicted a rise in the volume of manufacturing investment of 6 per cent. this year and of 15 per cent. next year. I should like to add—I did not have the opporunity of doing so yesterday—that the 15 per cent. is the highest increase predicted for more than a decade. Indeed, the level of investment is already rising. In the first half of this year manufacturing investment was 7 per cent. higher than in the preceding half year. There is no direct later information, but net new export orders for the engineering industries are 30 per cent. higher than a year ago and output in the engineering industry in September was 17·3 per cent. up on September 1972.
The latest CBI survey confirms the DTI survey of a rapid growth in industrial expansion. That report states :
The balances of firms expecting capital expenditure authorisations on buildings and on plant and on plant and machinery to be greater in the next 12 months than in the previous 12 are extremely strong by historical standards, barely below the record levels of the previous survey.
That is the general feeling about expectations.
The hon. Member for Ashton-under-Lyne referred to the effect of interest rates on investment decisions. The prospects of growth in the markets are the prime determining factors in investment decisions, and the effect of interest rates, while obviously of some significance, is not of the importance suggested by the hon. Gentleman.
I turn now to the measures that were taken earlier in November. My right hon. Friend the Chancellor of the Exchequer has made it clear that these


were taken partly for external reasons and partly to prevent a decline in the value of sterling which would have given a further twist to the inflationary spiral. Sterling has remained remarkably steady during the period following those measures.
It is also worth emphasising that the policy which we adopted and the measures which we took early in November certainly do not represent a stop in the old sense of "stop-go ". It is still our belief that the economy will continue to grow at the rate of 3½ per cent. in line with productive potential, which, despite the disparaging remarks made by the hon. Member for Ashton-under-Lyne, is indeed a rapid rate of economic growth. The restriction on credit is intended to keep monetary expansion in line with the needs of the economy and avoid creating problems of demand management for the future.
It is of course the case that there are some shortages of labour and material which exist particularly in London and the South-East and particularly, as one of my hon. Friends said, in certain sectors of industry—the construction industry and some parts of the engineering and chemical industries. The important way to deal with these micro-economic problems is to go for them in order to remove the bottlenecks which exist. I do not think that it would be appropriate to tackle them by a general policy of deflation.
I want also to say a few words on some of the points which have been made with regard to the balance of payments and its relationship to economic growth. I have already suggested a number of points on exports. It is important to look at these questions as a whole, and I understand the points which were made by a number of my hon. Friends in commenting upon this situation.
If I may take a broad view, it is now generally recognised that the situation we are now facing is one somewhat unlike the traditional position following a period when an exchange rate has depreciated and where one gets a simple J curve. I think that we all would now generally take the view that we now have a whole series of J curves where the immediate effect of the exchange rate changes tends to mean that the situation in simple terms tends to worsen before it improves. None

the less, a number of those changes in the exchange rate are some time past. I have no doubt that we shall find a number of improvements in the balance of payments as time passes.
I would not accept the view that one can pick out a particular month's figures—in the case of the Opposition, last month's figures, which as my right hon. Friend the Secretary of State for Trade and Industry rightly pointed out, were affected by a number of unusual factors—and then multiply them by 12 and suggest that that is the annual rate of the balance of payments deficit as if it had some significance. I totally reject that kind of phoney arithmetic which, I regret to say, a number of hon. Members opposite—for instance the hon. Member for Loughborough—appearing as prophets of doom, felt it was appropriate to engage in.

Mr. Sheldon: Will the hon. Gentleman give way?

Mr. Higgins: Only if the hon. Gentleman is very keen, because he knows that he left me very little time.

Mr. Sheldon: I am very well aware that the House wants to give to my hon. Friend the Member for Putney (Mr. Hugh Jenkins) time to propound his motion.
I cannot allow the hon. Gentleman to get away with his statement about phoney arithmetic. He spoke about his right hon. Friend the Secretary of State for Trade and Industry. If there was any phoney arithmetic it was phoney arithmetic with regard to that month's figures which left out of reckoning altogether the Heathrow situation.

Mr. Higgins: I do not accept the operation in which the hon. Member for Loughborough was engaged. He selected a deficit which was particularly high in a certain month, multiplied it by 12, and then said that that was what the annual figure was as if it had special significance or validity. I say that it does not have some significance or validity at all.
The important point that we need to get over about the trade figures is that export volume is rising faster than import volume. In the first nine months of 1973 export volume rose by 21 per cent. over the corresponding period of 1972, compared with an import rise of 16 per cent.


on the same basis. Sterling is now very competitive, giving enormous opportunities to our export industries.
Finally, on the overall economic picture, the Government's strategy has been one of controlled economic expansion The domestic causes of inflation have been curbed by the adoption of a fair and firm counter-inflationary policy, in marked contrast with the Labour policy—a statutory policy designed not to reinforce deflation but to protect expansion. That is a fundamental difference between the policy of the previous Government and our policy.
We aim to ensure that demand does not outstrip productive potential, that the confidence of industry is maintained. Following a major stimulus of demand to employ under-used resources and encourage industrial investment, we are now moving successfully through a period of transition to a rate of growth which is in line with the growth of productive potential. We are adopting policies which will enable us, in line with the motion, to increase the underlying rate of growth in our economic capacity as new industrial investment comes into production.
I am therefore grateful to my hon. Friend the Member for Leek for moving this motion. The Government are determined to maintain economic expansion. There is every reason, for the reasons that I have given, to believe that it will be achieved.

Question put and agreed to.

Resolved,

That this House calls upon Her Majesty's Government to continue to pursue policies which will ensure a high and sustained rate of growth.

GOVERNMENT (CABINET SYSTEM)

3.43 p.m.

Mr. Hugh Jenkins: I beg to move,
That this House, having regard to the inability of successive Governments to conduct the affairs of this nation to the wellbeing of all citizens and to the satisfaction of members of political parties, and recognising that this inability is due in some measure to the failure of the present system of Government to harness and properly employ the talents and abilities of all Members of Parliament, believes that the Cabinet system of Government should be subjected to a close and detailed examination and that a Royal Commission should be set up with terms of reference which would include a consideration of the committee system of government practised by local authorities and of methods of Government employed in other countries and especially in Commonwealth countries, where the British system has been adapted to the end of greater democratic participation by the elected representatives of the people to that of more effective political influence upon the Executive.
We have about 17 minutes to deal with the cabinet system of Government. I do not know that we shall succeed in doing more than opening a discussion which I hope will continue for some time. It is high time that these matters were discussed. We have put them into cold storage for too many years ; we have left the methods of government out of consideration while dealing with the problems of government. It is high time to ask ourselves whether the faults in the machinery are not in a way responsible for some of the problems. I am afraid that I shall be able to leave very little time to the Minister to reply, but I hope that the discussion will continue. I am grateful to be able to start it.
In politics, as in football and, indeed, in the media, the temptation is always to go for the man. People are more interesting than policies, and the dullest thing of all is the machinery of government. One can hardly wonder that people generally tend to go for the man. To attack an individual is satisfying, to find a scapegoat is splendid, especially if he happens to be the leader of one's own party.
But it betrays immaturity. Such attacks are a victory for the emotions over the intellect, for the guts over the mind. Whether the attacker is the right


hon. Member for Wolverhampton, South-West (Mr. Powell) or my hon. Friends the Members for Stockton-on-Tees (Mr. William Rodgers) or Pontypool (Mr. Abse), however the attack is made—whether in speech or writing, or under the guise of psychiatric analysis—and whether the scapegoat is the Prime Minister or the Leader of the Opposition, it makes no difference. The attacker is always a disappointed man, and his motives, even if unknown to himself, are very plain to everyone else. If, as is often so, the attacker is otherwise a man of distinction, that makes it all the more sad. Instead of giving way to these atavistic impulses, we should do well to ask ourselves why people and parties with opposite intentions often finish up by doing very similar things when in Government.
The motion says :
That this House, having regard to the inability of successive Governments to conduct the affairs of this nation to the wellbeing of all citizens and to the satisfaction of members of political parties, and recognising that this inability is due in some measure to the failure of the present system of Government to harness and properly employ the talents and abilities of all Members of Parliament, believes that the Cabinet system of Government should be subjected to a close and detailed examination and that a Royal Commission should be set up with terms of reference which would include a consideration of the committee system of government practised by local authorities and of methods of Government employed in other countries and especially in Commonwealth countries, where the British system has been adapted to the end of greater democratic participation by the elected representatives of the people to that of more effective political influence upon the Executive.

Mr. Deputy Speaker (Mr. E. L. Mallalieu): Order. Perhaps it would be as well to point out that there may have been a mistake in the motion. I think that after the word "people" should come the word "and".

Mr. Jenkins: I am grateful to you, Mr. Deputy Speaker. The motion has to be constructed in a single sentence. That is one of the curious traditions that we follow in the House. The fact that we follow such traditions is an example of our tendency to cling to practices and customs which, whatever may have been their original purpose, are outworn in this day and age. As Winston Churchill once said, we are, more than we know, the creatures of our institutions. I would

add to that "and of the relationships between our institutions."
However, as long ago as 1918 a committee reported on the machinery of Government. I am grateful to Mr. John Palmer of the research department of the Library, who has produced a mass of information which I shall not be able to deploy this afternoon. Among that committee's recommendations, he found this one, which is very much to the point. The committee suggested that
A more efficient public service may expose the State to the evils of bureaucracy unless the reality of parliamentary control is so enforced as to keep pace with any improvement in departmental methods.
In other words, the committee was saying that an efficient Civil Service can run away and get out of political control unless the political machine, the machinery of Government, is strengthened to keep pace with the development of the Civil Service.
It is absurd to think when considering this matter that a certain Minister or even a batch of Ministers can keep effective day-to-day control over one of the huge Departments which now inform our political life. They are very much larger than they were in 1918 when the committee reported.
People sometimes ask what happens to politicians in office, and why is it that we find Labour trying to limit wages and the Tories nationalising industries and spending public money as though it were water. The philosophies of the two parties seem to undergo a strange change when they come into office. Professor Richard Rose has put his finger on at least one of the problems. In an article in New Society on 30th October 1969 he said
The changes that occur in politicians in office may be explicable by the fact that a Minister, in his contacts with other people, is expected to be a proponent of a departmental point of view.
I notice that the departmental point of view has absented itself from our discussions. Perhaps it was thought that it would be better to be out of the way while these questions were being discussed.
Professor Rose continued :
It is therefore hardly surprising that party goals become less salient than administrative interests ".


It is true that if they are not careful, Ministers, when they come into office, tend to become the creatures of their Department rather than the other way about. Can we reaffirm the authority of the House of Commons and of the parties which make it up against the tendency of the executive to go its own way?
I am reminded of a television debate a few months ago in which my right hon. Friend the Member for Coventry, East (Mr. Crossman) asked my right hon. Friend the Leader of the Opposition, "Where did we go wrong, Harold?" My right hon. Friend the Leader of the Opposition replied, "We did not fail." It is true that in some respects the last Labour Government did not fail. However, in some respects the question asked of my right hon. Friend the Leader of the Opposition by my right hon. Friend the Member for Coventry, East was apposite. If we had a more effective Government machine and if back-bench Members had been able to have effective participation in the processes of Government, the question how we failed would have been asked less.
The State machine is like a car. There is a political engine and an administrative chassis. The clutch slips and the gearbox is faulty. At times it seems to slip into reverse, so that the control over the economy, as has been suggested earlier, seems to be somewhat erratic and uncertain.
These are not new questions. As long ago as 1924 a debate took place between Ramsay MacDonald and Fred Jowett, who was a great proponent for the improvement of the machinery of government. Possibly that is why he has been almost entirely forgotten, although he was a significant figure in Labour Party politics earlier in this century. Fred Jowett advocated, as I am doing, the introduction of a committee system of Government. He was answering the objection that such a system would remove the watch-dog possibilities of the House of Commons. Fred Jowett answered that objection effectively but not in a way which I have time to develop now. I can only ask the House to accept that there is a good argument against the proposal that the development of the committee system of Gov-

ernment and the involvement of all back benchers in the process of Government cannot be carried out without serious disadvantages.
A wealth of talent is being wasted on both sides of the House. That talent has been wasted for many years. London is better governed than the country as a whole. It would be still better governed if central Government kept their incompetent fingers out of the municipal pie. That is not only because the Labour Party is in power across the bridge, or because my wife happens to be chairman of the management housing committee, although that is part of the story.
The machinery of the committee is geared to the implementation of political decisions, and all elected members participate in the process. An answer to the problem can be found by a system which runs along those lines. The motion before the House does not ask the House to decide that what I am advocating is right. It merely asks the House to decide that a Royal Commission should be established with terms of reference which would include consideration of these matters. Whatever else may be thought about the problem, I suggest that there is sufficient room for disquiet in the history of post-war government to warrant another prolonged and detailed look at it in the 1970s.

3.55 p.m.

The Parliamentary Secretary to the Civil Service Department (Mr. Kenneth Baker): It is a pity that we have such a short time for the debate, because the hon. Member for Putney (Mr. Hugh Jenkins) has raised two interesting points. It is unfortunate that he based such an interesting debate on a motion which I can only describe as a monster. Not only does it have only one full stop in 11 lines ; it makes up for lack of grammatical termination by including a series of half-truths, a few unverified assumptions and at least two illogical assumptions.
The hon. Gentleman's first point was that Ministers do not have great enough grip over the civil servants, and his second was that back benchers do not have a great enough grip over their Front Benches and the executive.
In considering whether Ministers have effective control over their Departments


and civil servants, I have been rather surprised by the way in which certain memoirs by members of the last Government have made rather a thing of it. The right hon. Member for Coventry, East (Mr. Crossman) in the Godkin Lectures in 1970—when he was still a Minister—spoke of the strength of the Civil Service and how it was so difficult for Ministers to get their way in certain things. This view was developed by the Leader of the Opposition in his memoirs, and in a subsequent article by the right hon. Lady the Member for Blackburn (Mrs. Castle).
I do not happen to agree with this line of argument. I believe that if Ministers are determined to follow a course of action and have thought it through, its consequences and the method of doing it, the civil servants will, as they have done for any Government, fully support them. Therefore, when that rhetorical question was asked in the television broadcast, "Where did we fail, Harold?", the answer should have been that personalities were at fault—
The fault, dear Brutus, is not in the stars, but in ourselves …".
I am not making a party political point here.
The second point concerned the influence of back benchers upon the executive. I think the hon. Gentleman underestimates the value of back benchers. It is rather common to do so at the moment. But I believe that they have very considerable and real influence upon Governments. Indeed, the position of the back benchers has been improved enormously in the last few years, certainly in the five years since I arrived in the House, by the setting up of a whole range of Select Committees which can provide them with information by which they can get at the executive.
It is difficult, the complexities of Government being so great, for a back bencher who just reads the morning papers to come in as a talented amateur and try to get his rapier through the chain armour of Ministers and the executive, but the existence of the Select Committees provides the back bencher with weapons and opportunities to grill Ministers and civil servants and get at the mandarins, to get at the reasons behind policy decisions and even, on

occasion, to influence the formation of policy.
I believe that the hon. Gentleman seriously underestimates the value of back benchers. For example, the late Gerald Nabarro was never a member of the executive, but I think he had much greater influence on changes in taxation policy than many junior Treasury Ministers.

It being Four o'clock, the debate stood adjourned.

ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.—[Mr. David Walder.]

HOUSING (OVERSPILL ESTATES)

4.0 p.m.

Mr. Alan Haselhurst: I am grateful for the opportunity to raise the problem of overspill estates. The hon. Member for Heywood and Royton (Mr. Joel Barnett) would like to have been present this afternoon and he has authorised me to say that he shares my view about the future of overspill estates, as does the hon. Member for Rochdale (Mr. Cyril Smith), who cannot attend. We are all Members of Parliament for the Rochdale metropolitan district of the Greater Manchester county and speak, obviously, with experience of that area. Other hon. Members who may try to catch your eye, Mr. Deputy Speaker, may also speak of the same area.
The problem exists in many areas. There are 23,000 dwellings involved in this problem in the Greater Manchester area. The total list of overspill estates throughout the country is unknown. A letter from my hon. Friend the Under-Secretary gave me the names of 70 estates built between January 1966 and June 1973. He pointed out that there was a difficulty in compiling a more complete list, because fully comprehensive statistical information had never been collected. The Minister will forgive me if I say that that admission confirms my fear that the Department may still somewhat understimate the full social problems of overspill estates if it has not yet


compiled a list of the numbers of estates and the number of dwellings and people concerned.
My own concern is with the Langley Estate in the borough of Middleton, which has 4,800 dwellings, and the Hillock Estate in the urban district of Whitefield which has 1,050 dwellings. Langley with Middleton will become part of the Rochdale metropolitan district and Hillock part of the Bury metropolitan district. Both district councils, plus others, are concerned about the future of the estates from 1st April next year.
First and foremost are the problems of people living on the estates. There is the obvious problem that they are the victims of "no taxation without representation". They did not elect their landlords in the district, and they do not control the people elected to form the city council, which is their present landlord. This must be undemocratic by any test.
Secondly, the whole concept of overspill estates tends to lead to the break-up of families as social units. When youngsters grow up and marry, it is not the normal way of things for them to expect to be able to live on the estate where they have grown up. There is an opportunity for re-letting, but it does not overcome the major problem confronting those most intimately concerned. Clergy who marry the couples say that they are virtually bidding them goodbye. The young couples move to another district while their parents get older and cannot always be assisted to solve their problems by their children, who are too far away. So the elderly parents become a problem for the social services, whereas if the newly-weds were able to live in the same area, such problems would not be so acute.
The third problem is that of education. When young marrieds move away, their children do not go to the school that they attended. Schoolteachers will attest that there is no first or second generation build-up of pupils in overspill estate schools. Fourthly, people on these estates feel that the bigger the estate, the less it belongs to the town in which they have been placed. The feeling, I am afraid, is reciprocated by the older inhabitants of the town which has received the overspill estate. These are all serious prob-

lems which have been evidenced now for many years. The Langley Estate has been in existence substantially for 20 years, and all of these problems are writ very large indeed in the eyes of the people and those who work among them.
If there are problems for the people, there are now also problems for the local authorities which will be taking over on 1st April next. They believe that they are being given the powers of planning, education, housing and social services. They wish to be able to exercise those powers throughout their territory. It seems rather odd that they will have, in some cases, veritable islands which they do not control. They wish to have a total approach to welfare problems, such as Seebohm recommended. But housing and welfare are closely intertwined. How can the new authorities maintain this total approach to welfare if they are not the landlords of all the publicly-owned housing within their district?
They cannot sensibly provide amenities on an area basis if parts of that area are treated in a different way and look to a different landlord for many functions. We shall not see a proper community built up. Certainly the new authorities will not be able to have a sensible allocation of tenancies throughout their district which will make the most economical, sensible and humane use of the housing stocks available.
This situation is crying out for action. To do the Government justice they have recognised this fact, and issued Circular 107/73 in August, inviting local authorities concerned to try to reach some agreed solution to the problem. I fear that the circular has its limitations. These have been illustrated by the attitude of the Manchester District Council which received a request from the metropolitan district councils which are its neighbours, and will have these overspill estates in their territories, to meet their representatives to discuss the question of transfer. The reply was :
Manchester is unable, at this stage in the development of its housing policy, to consider any change in the management of its overspill estates.
It then enumerated certain reasons, two of which were that Manchester would lose some of the best of its housing stock and would not be able to continue with its slum-clearance programme or to re-house those on its large waiting list.
Those reasons are not at all satisfactory, because it is fully accepted by the other metropolitan district councils such as Bury and Rochdale that if they took over ownership of the houses in overspill estates they would have an on-going obligation to help Manchester solve its housing problems. These houses would not therefore, be unavailable to Manchester. The metropolitan districts would accept the obligation to take so many families from Manchester on an agreed basis. Transfer of the ownership of the houses on these estates over a period of years seems to be the most satisfactory solution.
There need be no fear on the part of Manchester that it will be deprived of the answer to its housing problems. There would have to be guarantees by the metropolitan district councils that Manchester's terms in that respect could be met. There is the matter of financial provision which I know concerns some of the metropolitan district councils. But I should like to hear from my hon. Friend that the Government might be able to ease the transition if there were any apparent difficulty. I imagine that the transfer would be done on the basis of outstanding loan debt, but I should be interested to know whether the Government have any alternative view and whether it might be done on the basis, for example, of the value of the house. The metropolitan district councils should at least be given the opportunity of making an agency arrangement with Manchester under Section 101 of the Local Government Act 1972.
Serious social problems exist on overspill estates and I hope that they will not be overlooked at this time of local government reorganisation. In human, social and organisational terms the situation should not be perpetuated beyond 1st April next year. I hope that my hon. Friend the Under-Secretary of State will be able to give some indication of the Government's latest thinking on this matter.

4.11 p.m.

Mr. Tom Pendry: I am sure that I express the view of hon. Members who have overspill estates in their constituencies when I say how indebted we are to the hon. Member for Middleton and Prestwich (Mr. Hasel-

hurst) for raising this subject today. We have the opportunity of expressing our dissatisfaction with the system in the presence of the Under-Secretary of State. I do not intend to explain the difficulties in my constituency ; they have virtually been dealt with by the hon. Gentleman.
We all accept the overall concept, that it is good that people should be removed from slum conditions to more pleasant surroundings in estates outside the city, and it is very attractive at first sight. There are, however, immense problems. Some of the estates are concrete jungles, and Members who have to deal with these problems daily are well fitted to speak to the Minister on this matter. In the past, Governments, whatever their political complexion, have not dealt with the problem. Therefore, this is not a party political issue.
I must declare my interest. I represent a constituency with two overspill estates from Manchester in the new Tameside district of which my constituency is part. I have Hattersley in Hyde and Carrbrook in Stalybridge, with about 8,000 to 9,000 overspill dwellings. I therefore know something about the subject. I believe that the Manchester District Council has genuine reasons for stating a case to the contrary, but it must be told that by ridding itself of a slum problem it is giving other authorities problems of equal difficulty. There are problems on the social side and on the question of representation, for instance, which are not always taken into account by the city authority.
Those of us who press for change are not alone. In 1971 the North West Economic Planning Council, in its document "Social Planning in New Communities", concluded that
Experience in the North West suggests that the co-operation between authorities would have been greatly enhanced if it had been agreed that the receiving authority would assume ownership of the development on completion….
It went on in the same vein to say :
 … we recommend that during the forthcoming reform of local government arrangements should be made to bring about a similar situation in respect of existing development".
It came down firmly in favour of the sort of suggestion which the hon. Member for Middleton and Prestwich has made. The Under-Secretary of State can


be assured that those of us who represent people on overspill estates are fully behind the hon. Gentleman in what he has said today.

4.15 p.m.

Mr. Spencer Le Marchant: As the hon. Member for Staly-bridge and Hyde (Mr. Pendry) said, the House owes a great debt to my hon. Friend the Member for Middleton and Prestwich (Mr. Haselhurst) for bringing up a problem which might appear only to be a ripple but will grow into a great wave. We are talking about the lives and environment of many people.
In my constituency there are but 4,000 of these souls in about 1,500 dwellings, yet they are up in the Derbyshire hills completely overlorded from the vast metropolitan sea-level city of Manchester. That is wrong. They have no representation on the Manchester Corporation. These are the words of Mrs. Sheila Duncan, a local councillor :
It is a frustrating fact that when matters of the main social factor occur, i.e. housing, I have no direct means of representing them on their housing authority.
The question of the missing landlord is all-important. That is illustrated in the estates in my constituency in Gamesley and Hadfield by the fact that so many tenants want to go back to where they came from. They feel at home neither in Manchester nor in the High Peak. After 1974 they will feel no differently, because Derbyshire will be outside the metropolitan area of Manchester and control will still come from Manchester.
The case of Manchester Corporation as put by my hon. Friend the Member for Middleton and Prestwich is a weak one. Manchester says that it will lose its best housing and be left with its worst. We in the High Peak fully recognise our responsibility in Gamesley to rehouse people who have been cleared from the slums of Manchester. We recognise also—strong believer though I am in the sale of council houses—that these estates should not be sold because they must be kept for people generally, including those who are cleared out of the Manchester slums.
We must take on the people and we must pay the proper price, but we can

do the job much better by trying to integrate the people into the areas in which they live. To give one example, in this estate there are 600 houses with flat roofs. Who in their senses would build a house with a flat roof in the Derbyshire hills when we have such bad winters? These houses are already rapidly deteriorating. The new High Peak authority will be much better able to cope with that situation than is a vast Manchester organisation.
I ask my hon. Friend, please, to put people first. These are first-class citizens and must be treated as such. If the authorities will not co-operate between themselves, I ask him to take powers to ensure that they do.

4.18 p.m.

The Under-Secretary of State for the Environment (Mr. Reginald Eyre): I am sure that the House is grateful to my hon. Friend the Member for Middleton and Prestwich (Mr. Haselhurst) for providing the opportunity to discuss this question of housing development which lies outside the area of the owning authority. I know how much importance he attaches to this subject and I listened carefully to what hon. Members on both sides said, I recognise that this feeling arises largely from their real concern for the well-being of their constituents.
My hon. Friend the Member for Middleton and Prestwich recalled the previous occasion when he raised the matter on the Adjournment. That was on 6th May 1971, when he was concerned particularly to draw attention to the special problems of the Langley Estate, Middleton, in his constituency.
At that time, the Government's proposals for local government reorganisation were still under consideration. Since then the Local Government Act 1972 has been enacted and as from 1st April 1974 the Langley Estate will be part of the new Rochdale Metropolitan District.
My hon. Friend's primary concern is with the future control of these estates. He believes it to be wrong that in the case of the Manchester estates control should continue in Manchester's hands and wants the opportunity of local government reorganisation to be taken to transfer control to the new Rochdale District Council.
I can assure my hon. Friend that we have given very careful consideration indeed to the problems to which he drew our attention then and to which he has again directed the attention of the House today. I recognise the strength of his view—and the views expressed by my hon. Friend the Member for The High Peak (Mr. Le Marchant), and by the hon. Member for Stalybridge and Hyde (Mr. Pendry)—that the action we took as a result may not go far enough, and I think the House would want me to give an account of our views on this matter because of its intrinsic importance and because it concerns a number of other hon. Members who have similar housing developments in their constituencies.
What are the particular problems which arise? As my hon. Friend has indicated, the tenants have no direct say in the election of councillors on the landlord authority. In that respect they differ from tenants of other council houses where the owning authority and the area authority are the same, and they feel very strongly that this puts them in a difficult position.
It might also be thought that it may be confusing for tenants to have to look to one authority for most local government services and to another for their housing, and that with such a situation they might find it less easy to feel themselves as part of the community. They might, as it were, be looking back to the place from which they came rather than giving themselves fully to the life around their new home.
There are also the housing responsibilities of the local authorities concerned. The landlord authority provided the houses in order to meet its housing needs and may well feel that it continues to require most of the vacancies which arise because of continuing housing needs. But the authority in whose area the houses are located also has housing responsibilities arising from the people who have come to its area. Second generation families are formed who may want to be housed near their parents.
All these matters need to be borne in mind and it was because we recognised them that we decided to issue Circular 107/73 after consultation with the local authority associations. The circular draws attention to the kind of problems

to which my hon. Friend has referred and asks that the local authorities concerned should consult together and seek ways of overcoming whatever difficulties might have arisen or might arise in the particular case.
The circular refers to transfer of ownership as a possible solution and also to ways in which special arrangements can be made for adequate representation of the interests of tenants.
The terms of the circular rested on our belief that, whilst it was right to draw the attention of local authorities to these matters, the difficulties and solutions required were bound to vary from place to place and that it should be possible by voluntary arrangements between authorities to overcome the problems which had been identified.
We did not believe that compulsory transfer of ownership was the proper course, nor, indeed, had we any reason to believe that this was the solution favoured by local authorities generally. Our consultations with the local authority associations about the terms of the circular indicated that there were different views as to what the right solution might be in particular cases, but I think it is fair to say that no association thought that the ownership of all these overspill estates should be compulsorily transferred.
My hon. Friend has himself referred to another possible way of dealing with these situations. He suggested that failing transfer of ownership, an agency agreement might provide a possible solution through which management would be in the hands of the council in whose areas the houses are situated.
The circular was not intended to provide an exhaustive list of all possible solutions. Moreover, it was designed for general application. But it is very clear that the social problems and indeed the problems of democratic participation with which we are all concerned in many different fields are exacerbated where the scale of the development is very substantial.
There is no doubt that the scale of the case with which my hon. Friend is primarily concerned is substantial. Indeed, from the reports I have had from social workers, the police, and the churches and from tenants themselves,


it seems that the real concern in these very real problems arises primarily, if not entirely, in relation to the vast overspill developments such as those which serve Liverpool, Manchester and Birmingham.
This is also true of the interest in the subject which has been expressed to Ministers in my Department by hon. Members on both sides of the House. The right hon. Member for Huyton (Mr. Harold Wilson) has written to my right hon. and learned Friend about the problems in his constituency in relation to the Liverpool estates there. The hon. Member for Stalybridge and Hyde is concerned, as he said today, about the Manchester estates in his constituency, as is my hon. Friend the Member for The High Peak, and similar concern has been expressed by the hon. Members for Rochdale (Mr. Cyril Smith) and Heywood and Royton (Mr. Joel Barnett), as well as by my hon. Friends representing constituencies in the Manchestesr and Birmingham areas. It is also relevant to refer to what my hon. Friend the Under-Secretary of State—the Member for Meriden (Mr. Speed)—said on this subject in relation to the Chelmsley Wood development in the Standing Committee on the Local Government Bill on 20th January 1972, when he described the problems of the tenants.
There are some cases, outside those areas, where the authorities concerned will merge on 1st April 1974 so the problems of future ownership do not arise there. No doubt too discussions between authorities concerned are proceeding elsewhere on the lines suggested in the circular.
In a few other cases, I am told, agreement has been reached voluntarily between the authorities, which will be concerned after 1st April 1974, that ownership shall pass to the authority in whose area the estates will then be situated.
So some progress is being made along the general lines which my hon. Friend favours, and I very much hope that in all cases the discussions between authorities will produce arrangements which are in the best interests of the tenants and which will reflect the differing housing duties, responsibilities and needs of the authorities concerned. I hope that these

matters will be capable of satisfactory resolution whichever authority is the owner.
The main problems, as I have said, seem to arise in the Liverpool, Manchester and Birmingham areas. I am sure the House will be glad to learn that negotiations between the new Liverpool Metropolitan District and the new Knowsley Metropolitan District Council have produced agreement in principle that the ownership of the Liverpool houses in Knowsley will be transferred to the Knowsley council. I feel sure those two authorities are to be congratulated on the spirit of co-operation exemplified in their agreement.
It is very disappointing, however, to hear from hon. Members representing other areas that other major authorities seem so far not to have approached the problem in the same open-minded way. In the Government's view it is essential that no possible solution should be excluded from discussion and that there should be a determination on the part of all concerned to produce agreements in which the predominant factor will be the satisfaction of housing needs. These needs include both the present needs of existing tenants and the future housing needs of people living in places like Birmingham and Manchester, which will have to be met at least in part by the continuing use of vacancies arising on these estates.

Mr. Julius Silverman: Is the hon. Gentleman aware that people are being transferred to Chelmsley Wood at the rate of 30 a week and that it would be very serious for Birmingham if the Chelmsley Wood estate were taken away from it?

Mr. Eyre: I know that the need for re-lets to serve the needs of Birmingham is well accepted in respect of the Chelmsley Wood estate.
I was discussing the continuing need of people living in places like Birmingham and Manchester, and I was pointing out that they will have to be met at least in part by the continuing use of vacancies arising on estates of this kind. This means that there should be a generous recognition, in any agreement, of the continuing need of authorities, like Birmingham and Manchester, for the allocation of the tenancies of re-lets. I very much hope that the local


authorities concerned will settle all these matters between themselves and not compel the Government to intervene. Appropriate financial arrangements may depend on the situations of the two local authorities concerned. That is a negotiable matter, and I hope that my hon. Friend will allow me to pass from that point and to say that there are several forms that such settlement could take ; for example, management agreements, the transfer of the property with conditions concerning re-lets, and so on.
The Government cannot stand aside where there is no prospect of a satisfactory solution to these problems, which are so important for the well-being of large numbers of people. In the absence of a satisfactory agreement between the authorities, the Government will have to consider taking positive action to secure a solution.

Question put and agreed to.

Adjourned accordingly at half-past Four o'clock.